Can an immediate family member buy my home with 1031 and I rent

[Mary Chen]

I’m really trying to help my parents get out of their existing rental property location to find something where I live in California. Then a thought came to mind, is it possible that they could perform a 1031 exchange on my home and I just pay them rental income? Considering homes in California has gone up so much, could I sell it to them below market value? I know this may sound shady but I’m just trying to see if there is a way they can avoid the taxes, still get that supplemental income they need, and still have the cash flow to buy another home if they see one.

[Dave Foster]

@Mary Chen, This scenario is exactly what the IRS doesn't want to see.  It's a form of what is called "Basis shifting".  And why they are very suspicious of any purchase from a related party to complete a 1031 exchange.