Disposition refers to the act of selling or transferring the relinquished property, which is the property the taxpayer currently owns and intends to exchange for a like-kind property.
A disposition occurs when the taxpayer transfers legal ownership of the relinquished property to a buyer or other entity, typically in exchange for cash or other consideration. The disposition is a critical step in the 1031 exchange process, as it triggers the start of the 45-day identification period during which the taxpayer must identify potential replacement properties.
It is important to follow the rules and guidelines for disposing of property in a 1031 exchange, as failure to do so can result in tax consequences and potential disqualification of the exchange.
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