Taxpayer can file a claim for missed homeowners exemption

Q. My wife and I purchased our first home about three years ago. A friend was looking at my current real estate tax bill and noticed I was not receiving the homeowners exemption. My friend is a Realtor and thought the reason probably was because we had purchased the property from someone who had been renting the property out. Because the prior owner was not entitled to the exemption and we didn't do anything to change it, the exemption has not been applied since we purchased the property. Is there anything we can do to recoup this money?

A. Yes. Visit your county treasurer and tell them your story. Bring your tax bills and proof of your purchase (the settlement statement from your purchase would be sufficient) with you. It is my understanding most, if not all, counties in our area will allow you to file a certificate of error for up to three prior years.

As the homeowners exemption may be worth up to $600 to $700 or more of a reduction on your tax bills, this endeavor will likely be worthwhile. Don't delay. You would hate to learn you missed a year of the exemption because you were a few days too late in filing.

Q. I have a question regarding 1031 exchanges. I sold my building about two months ago. I found my replacement property a few weeks later and was scheduled to close on the replacement property in September. I disclosed the replacement property to the intermediary within the required 45 days from the date I sold my building. So far, so good.

A few days ago I learned that the property I was attempting to purchase is now involved in litigation. Someone has alleged that the party who sold me the property is not the real owner. There are allegations of forged deeds and other fraudulent activity.

My attorney tells me it is virtually certain that this property cannot and will not be conveyed to me within the required 180 days from the date I sold my building. Are you aware of any 1031 provisions that would allow me, under these circumstances, to identify another property, even though I am now outside the 45-day requirement to identify?

A. No, I am not aware of an exception to the 45-day identification rule, regardless of the circumstances. This is, of course, why oftentimes parties participating in 1031 exchanges identify more than one property. There are restrictions, however, when identifying numerous properties, which are:

• The Three-Property Rule. Up to three properties regardless of their market values may be identified. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the requirement regarding the amount of the purchase.

• The 200% Rule. Any number of properties may be identified as long as the aggregate fair market value of all replacement properties do not exceed 200% of the aggregate fair market value of all of the relinquished properties as of the initial transfer date. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the requirement regarding the amount of the purchase.

I can offer two possible courses of action.

One, you could intervene in the court case regarding the property you identified. Perhaps you can convince the court to allow the sale to be completed while the parties battle over who is entitled to the proceeds. The proceeds from the sale would be deposited with the court pending a resolution of the litigation.

Another possibility would be a structured purchase/sale of a different property. Speak to your tax adviser regarding this potential option.

• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tom@thomasresnicklaw.com or call (847) 359-8983.