Is this possible?

Question

I have a family business that is being sold, it consists of two funeral homes… we will be doing an asset sale sometime in the near future.

We would like to purchase a real estate portfolio with the money from the sale.

My question is:

If we sell the company as an asset sale, can we 1031 the real estate separate from the other aspects of the company? I have a portfolio of 13 doors that I could purchase and would like to 1031 into that portfolio. The portfolio would be roughly the same amount possibly less and the rest we would look for another property to purchase. So we’d certainly be purchasing something of equal or greater value.

Thanks

Whitney Nash · Answer

Hello @Phillip Wright

Yes, you can do a 1031 exchange with the portion of the sale that is attributable to the 'real property'. You will want to look at the valuation of the business entity itself vs. the value of the buildings, land, and any other 'real property' and work with your CPA to make sure that the amount that goes into the exchange is correct. You can then use the 1031 funds to buy the 13 door property and a second investment property if you want/need.

Pearse Brolly · Answer

If you're planning to sell the business and roll the proceeds from the real estate into the 1031 portfolio and you expect an additional return from the value of the business itself, you should look into Opportunity Zones. Perhaps pairing them together will allow you to enjoy the tax benefits while getting real estate exposure (growth through OZ and income through the 1031). Happy to help answer any questions.

Dave Foster · Answer

@Phillip Wright, since you're doing as asset sale rather than an entity sale the real estate can indeed be separated so that you do a 1031 exchange on it.

However, a key to remember is that even though you are selling the assets so that the real estate will change deeds. You will need to purchase your new 1031 real estate as the same taxpayer and entity that actually owns the business. So. your business entity will probably stay alive at least long enough to complete your 1031 exchange.

Dylan Speer · Answer

If you are selling your family business as an asset sale and you want to use the proceeds to purchase a real estate portfolio, it may be possible to conduct a 1031 exchange for the real estate portion of the sale. Do you have a qualified intermediary you're working with?

Is this possible?

Is this possible?

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