Question: Is it true, under the new...

Question: Is it true, under the new tax law, that tax-free exchanges are prohibited?

Answer: No. However, what is important to remember is that in the case of a tax-free exchange, it can no longer be delayed more than 45 days.

After the first property has been transferred, the exchange property must be designated within a 45-day period or else the benefits of a tax-free exchange will not exist. This will severely hurt a great many speculators who are often interested in selling property and then taking their time in acquiring a new property and the tax.

The new tax law also lengthens the period of time in which income property can be depreciated. The aim of the legislation was to plug some of the holes that have helped higher-income people reduce their taxes.

The legislation also puts a cap on the amount of interest that can be charged when someone carries the paper on a home that they have sold. It is expected, however, that this aspect of the law will be repealed before it becomes effective.

Fontaine is president of the Western Regional Master Builders Assn. He will answer questions concerning home improvements. Phone 213/858-2933 or write him at 8727 West 3rd St., Suite 203, Los Angeles 90048.