1031 exchange specifics - Posted by Paul T.

Posted by JOHN HASLACH, CPA, MST on May 17, 2007 at 15:14:47:

The internal revenue code is available online if you feel you can do this type of research and planning without a professional at http://www.fourmilab.ch/ustax/www/sections.html

IRC Section 1031, in part (see (a)(2)(D) below)-

a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
(2) Exception
This subsection shall not apply to any exchange of -
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
© other securities or evidences of indebtedness or interest,
(D) interests in a partnership,

1031 exchange specifics - Posted by Paul T.

Posted by Paul T. on March 27, 2007 at 15:52:03:

“Is it possible to 1031 exchange out of a multifamily property as the single owner and into an LLC as just one of several partners acquiring a new multifamily, even though the other partners are not 1031 exchangers. How does the like-kind rule impact this and what would the mechanics / structure of such a transaction, including the new loan look like? (Our example properties: Selling a 10-unit with $200k equity/$800k debt, and buying within the LLC an 80-unit at 90% LTV financing for $2m, applying the $200k, and other partners are putting nothing down other than reserves.)”

Thank you for sharing your knowledge.


Re: 1031 exchange specifics - Posted by bo_hawk

Posted by bo_hawk on April 17, 2007 at 16:48:57:

The following is from instructions for IRS form 8824. I would be astonished if what you are describing qualifies as an exchange of like-kind property. You are relinquishing real property. You appear to be receiving shares in an LLC that holds real property. It does not sound like the same thing to me

Like-kind property. Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties. See Pub. 544, Sales and Other Dispositions of Assets, for more details.

Real properties generally are of like kind, regardless of whether they are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.

Re: 1031 exchange specifics - Posted by dealmaker

Posted by dealmaker on March 27, 2007 at 16:44:57:

IIRC the “title holding” must be identical on the relinquished ppty as on the acquired ppty. I’d make darn sure that not only a facilitator but a good RE attorney looked it over before I committed anything to paper, or earnest money.

The worst thing in the world is to go to the trouble of setting up a 1031 and then having something go awry and miss out on the tax advantage!