Why would you not just do a 1031 Like Kind Exchange if your real estate is involuntarily converted?
First of all, a §1031
Like-Kind Exchange only applies to
property used in a trade or business
or held for investment purposes.
Therefore, you cannot take
advantage of §1031 if your home
is involuntarily converted. Second,
the rules under §1033 are much
more flexible than the rules under
§1031. For example, the sales proceeds
in a §1031 Exchange must be
held by a Qualified Intermediary
such as the ES Group until they are
used to purchase the replacement
property. However, the property
owner can hold their own funds
in a §1033 Involuntary Conversion
Exchange. Also, when dealing with
property that is used in a trade or business, or held for
investment
purposes, the taxpayer has 3 years
to purchase the replacement property
instead of the 180 days one
would have in a §1031 Like-Kind
Exchange.