Posted by JOHN K HASLACH, CPA, MST on September 20, 2004 at 16:21:43:
Good point, I see what you are saying.
A True Exchange - Posted by Tony S. in FL
Posted by Tony S. in FL on September 16, 2004 at 21:12:33:
I understand 1031 exchanges where the proceeds of a sale is held by a third party and you exchange for like-kind property, etc.
What about a “true exchange” where two parties swap their properties directly?
Suppose Joe has investment property and Bob has residential. Joe wants residential and Bob wants investment. They decide to swap.
How are the taxes handled in this case? Would Joe still have to pay capital gains as a result of swapping for an unlike-kind property?
If the parties just quit-claimed the deeds to each other would that avoid cap gains taxes?
Tony
Re: A True Exchange - Posted by William L Exeter
Posted by William L Exeter on September 19, 2004 at 19:47:36:
This is a true two-party 1031 exchange. You do not need an Accommodator. You simply record grant deeds and “swap” the properties with each other. I am assuming that both properties are held as rental property so they are considered to be like-kind property. This also assumes that the property values are the same, otherwise one of the parties would pay the difference to the other and the cash payment would be considered to be boot.
Re: A True Exchange - Posted by John K. Haslach, CPA, MST
Posted by John K. Haslach, CPA, MST on September 17, 2004 at 05:20:53:
If Joe swaps investment property for property he decides to make his residence, it will not qualify as a like-kind exchange for Joe.
If Bob exchanges his residence for investment property, it will not qualify for like-kind treatment. Bob may be able to exclude gain up to $500,000 if he meets the requirements.
Re: A True Exchange - Posted by Dave T
Posted by Dave T on September 22, 2004 at 01:10:46:
Don’t forget to remind Tony S in FL that net debt relief is taxable boot even though the two properties may have the same value.
Re: A True Exchange - Posted by JOHN K HASLACH, CPA, MST
Posted by JOHN K HASLACH, CPA, MST on September 20, 2004 at 15:48:44:
In the facts he presents, I beleive he says one is residential and the other is to be residential.
Re: A True Exchange - Posted by William L. Exeter
Posted by William L. Exeter on September 20, 2004 at 16:18:42:
Actually, this is what he said:
“Suppose Joe has investment property and Bob has residential. Joe wants residential and Bob wants investment. They decide to swap.”
It does not say “primary residence” or “personal residence”. Residential property will qualify for 1031 exchange treatment as long as it is held for rental, investment or use in a business. That is why I mentioned my assumptions just in case it was his primary residence.