Posted by William L. Exeter on July 15, 2003 at 12:14:26:
Yes, that is one potential structure. The third party typically buys the seller carry back note from the 1031 exchange account and therefore owns the note. They will receive their cash once the note is refinanced, paid off, or as payments come in. The taxpayer could also essentially replace the note with cash and then the taxpayer would end up owning the note.
Exchanging - Posted by Ben (IN)
Posted by Ben (IN) on July 14, 2003 at 10:23:48:
If a property is sold with a view to doing a 1031 exchange, but it is sold with owner financing, is an exchange still possible? That is, when the buyer refinances down the road a year and the equity in the note is finally paid, can an exchange take place at that time?
Ben
1031 Exchanges with Seller Carryback - Posted by William L. Exeter
Posted by William L. Exeter on July 14, 2003 at 10:39:50:
Yes, it can be done, but not when the note pays off. The 1031 exchange must be entered into at the time the relinquished property is sold and the replacement property must be acquired within 180 days after the closing. The note (seller carry back) should be in the name of the Qualified Intermediary. The problem is what to do with the note. You can use the note as part of your payment toward your replacement property (although this is not practical), you can sell the note at a discount to generate cash (this is usually too expensive, unless you have someone that will buy it at face value) or you can essentially replace the note with your own cash or cash that you have borrowed from a third party (it like buying the note out of your own 1031 exchange account). This may have been alittle confusing, so contact me if you would like more information or to discuss further.
Bill Exeter
Diversified Exchange Corporation
Re: 1031 Exchanges with Seller Carryback - Posted by Ben (IN)
Posted by Ben (IN) on July 14, 2003 at 12:00:33:
So the money to buy out the owner financing for the exchange to proceed comes from a third party. And that money gets paid back when the owner financing agreement is refinanced. Is that right?
Ben