L/O tax requirement for sellers? - Posted by R.Bruce(MD)
Posted by R.Bruce(MD) on April 16, 1999 at 15:20:07:
I am trying to get a seller to agree on a l/o for a townhouse they purchased through a 1031 exchange. They are unsure (as am I) of the tax implications on doing this. Is anyone familar with the tax regs for selling a 1031 acquired property by l/o?
These folks have never lived in the property. They have owned it as a rental for just over two years. Currently the property is offered for rent, and the owners wish to buy a house in about a year, which would mean the sale of the townhouse. They do not want to seller finance, but my offer has intrigued them because they don’t need cash for a year, and when the option is exercised, they won’t have the hassle of trying to sell next year to buy a house. So this solves two of their problems (finding a renter & then a buyer) and fits their timeline, with the exceptions of 1. Possible tax implications (cap gains, is it considered sold now, etc.) and 2. Rental is listed with a realtor (paying commission on rental or sale?).
I am pretty sure I can work something out with the realtor (rental comm. now, sale comm. at option exercise), but I need to strengthen my presentation of how they will benefit by doing this. Thanks for any ideas or input!