1031 Exchanges offer benefits to real estate investors.
"In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment..." -(IRS Publication 544)
In a 1031 a seller may be...
- An individual
- Married couple
- LLC
- Corporations
- Partnerships *
- "Tenants in common" vs. Partnership
It is important that the party relinquishing the property be the same party that acquires the new property.
Scenarios that wouldn't work...
- Husband and wife relinquishing investment and just wife acquiring replacement property
- LLC relinquishing investment and a member of the LLC acquiring replacement property
* Example issue: a husband that owns a property solely and wishes to exercise 1031 - may have to have his wife sign for lender requirements on title - this would nullify the 1031 and create a taxable situation.
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It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.
Treasury Mortgage - 550 Bridgeton Pike, Mantua, NJ 08051 - 1810 Springdale Road, Cherry Hill, NJ 08003
Licensed by the NJ Department of Banking and Insurance
I wonder how the current market has affected 1031 exchanges. Humm, can you use it to shift a loss to the future by shifting the basis?
I'm guessing there are fewer now than a couple years ago.
In the end (the real end) with a 1031 you never have to pay tax right? If your heirs get it, their basis is the value when you die so no gain....just don't give it to them or their basis will be your basis.
Thats right Paul - step up basis. Another reason why having a professional (accountant in this case) could save you 10's or even 100's of thousands.
---oops, a mistake. I said "just don't give it to them or thier basis will be your basis." I should have said "Just don't give it to them or your basis will be their basis".
On the other hand....if you are losing money instead of gaining like you would be in a typical 1031 and your basis is actually higher than current value.... humm, right. Talk to the accountant.!!
Ok, looking forward to part 3! Thanks again.