Posted by William L. Exeter on March 19, 2006 at 13:00:50:
Hi Ray,
Please note new email address. Announcements going out shortly.
Bill Exeter
1031 rules regarding replacement - Posted by Terry H.
Posted by Terry H. on March 08, 2006 at 12:02:52:
We are selling a commercial building for $4.2M There are 3 partners (A = 50%, B = 25%, C = 25%). Partner A also owns 100% of a property in CA that he bought for roughly $2M. He has owned it for roughly 6 - 9 months. All 3 partners would like to further develop the property in CA. Can we simply exchange into this property, or does partner A need to give up at least 1% (less than 50%) prior to completing the sale of the relinquished property in order to make the deal work?
Re: 1031 rules regarding replacement - Posted by andrew
Posted by andrew on May 13, 2006 at 21:41:40:
can you exhange a house for a lot, condo,?
"
Re: 1031 rules regarding replacement - Posted by William L. Exeter
Posted by William L. Exeter on March 19, 2006 at 13:12:23:
Ray is right. You have lots of issues here.
First, you call the three individuals partners. Are they truly partners? Do you have a formal partnership agreement? Do you file a 1065 partnership tax return? Or, are the three of you really individuals and file/report the property as individuals and hold title as individuals (tenants-in-common)?
Second, there may be related party issues here depending on how the over all transaction ends up structured.
Third, assuming that each individual is truly treating their respective interest as an individual (and not a partnership), each individual would have to make sure that their respective 1031 exchange meets the following three guidelines:
-
Exchange (trade) equal or up in value based on the NET sales price of the sale. So, if an individual sells their undivided interest in a property and the net sales price is $1.0 million, they need to acquire total replacement property(ies) valued at $1.0 or more.
-
Reinvest 100% of their net equity or cash that comes out of the sale property into the acquired replacement property(ies). You can pull cash out, but it will always be taxable to the extent that you have capital gain or depreciation recapture taxes.
-
Replace the debt paid off with equal debt on the replacement property(ies) acquired.
You are going to have significant challenges with these three items.
I would be happy to chat further with you.
Re: 1031 rules regarding replacement - Posted by ray@lcorn
Posted by ray@lcorn on March 08, 2006 at 21:01:25:
Terry,
You’re in a very, very sensitive area… fraught with peril, as the saying goes. Much to consider, not the least of which is related party dealing. Defintely not a DIY project. You need expert advice and guidance.
Try William Exeter at Diversified Exchange (wexeter@diversifiedexchange.com), or a qualified real estate tax attorney, such as John Hyre at www.realestatetaxlaw.com
ray
Re: 1031 rules regarding replacement - Posted by Bill Taylor
Posted by Bill Taylor on May 13, 2006 at 22:20:17:
Yep! You can exchange real estate for real estate. You cannot use this lot to build your own home one and you may not live in the condo but can use it for investment purposes.