Law unclear on Starker delayed exchange limits

      DEAR BOB: I greatly enjoyed your recent answer to that rental property owner, explaining how he can make a Starker delayed tax-deferred exchange for another rental property without owing profit tax. A few days later, at a Rotary meeting, I was seated next to a CPA. Since I don't know much about income taxes, I asked her "What do you think of Starker delayed exchanges?" She knew a little bit about them. Then I asked her how often I can make a Starker exchange. She thought it was once every five years. But when I read IRC 1031(a)(3), I didn't see anything about five years. How often can I make a Starker exchange? -- Allen H.
      DEAR ALLEN: Nobody knows for sure. That CPA was bluffing. By the way, it is shocking how many real estate agents, attorneys and CPAs have never heard of Starker delayed tax-deferred exchanges. As you know, we're talking about rental or business properties, not your personal residence. The only way to avoid profit tax when selling such property is to make a tax-deferred exchange.
      However, it's very difficult to make a direct exchange for "like kind" property you want. In 1984, Congress added Internal Revenue Code 1031(a)(3) to allow delayed exchanges. You can sell your rental or business property, have the sales proceeds held beyond your constructive receipt by a third-party intermediary (such as a bank trust department), and then use those funds to buy a qualifying "like kind" rental or business property.
      These exchanges are named after the late T.J. Starker who was the first person to have such a trade upheld in court. You have 45 days after the sale to designate the property to be acquired and 180 days to complete the acquisition. But there is no limit on Starker delayed exchange frequency. You can make as many of these up-trades as you want, as often as you wish. You can pyramid your equity from a small rental property to a giant office building, shopping center, apartment building or even a warehouse.
      Further information is in my special report "How to Profit from Starker Delayed Tax-Deferred Exchanges" available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010. Credit card orders are welcome at 1- 650-348-6900 or fax at 1-650-348-6916.
      -- Send your questions to Robert J. Bruss, Tribune Media Services, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611.