1031 Scenario - is it possible?

[Sri Voodi]

All gurus, 

I have a Single Family Home (SFH) property that I want sell and do a 1031 exchange.

Scenario 1 - Sell the property and buy 2 SFH's out of state. Does it qualify as LIKE-KIND property?

Scenario 2 -Sell the property and buy a Multi unit? Does it qualify as LIKE-KIND property?

Thanks

[Joe Homs]

@Sri Voodi is it an investment property?  (Rented out?)  If so, then yes to both of your questions.

Good Investing...

[Sri Voodi]

Yes it is an investment property and currently rented out. Sorry forgot to mention the most important part. 

Thanks for the confirmation. 

[Erik Estrada]

Quote from @Sri Voodi:

All gurus, 

I have a Single Family Home (SFH) property that I want sell and do a 1031 exchange.

Scenario 1 - Sell the property and buy 2 SFH's out of state. Does it qualify as LIKE-KIND property?

Scenario 2 -Sell the property and buy a Multi unit? Does it qualify as LIKE-KIND property?

Thanks

 Hey Sri, 

Are the purchases out of state going to be equal or greater to the sales price? 

Is the Multi Unit going to be in the same state? and equal to or greater than the sales price? 

[Bernard Joseph S.]

Yes to both questions if the original is an investment property as well and not your primary residence.

[Sri Voodi]

Quote from @Erik Estrada:

Quote from @Sri Voodi:

All gurus, 

I have a Single Family Home (SFH) property that I want sell and do a 1031 exchange.

Scenario 1 - Sell the property and buy 2 SFH's out of state. Does it qualify as LIKE-KIND property?

Scenario 2 -Sell the property and buy a Multi unit? Does it qualify as LIKE-KIND property?

Thanks

 Hey Sri, 

Are the purchases out of state going to be equal or greater to the sales price?  - Should be greater

Is the Multi Unit going to be in the same state? and equal to or greater than the sales price? 

Are the purchases out of state going to be equal or greater to the sales price? - Should be greater. I plan on buying 2/3 properties where the combined value should be equal or greater than Sale price. 

Is the Multi Unit going to be in the same state? and equal to or greater than the sales price? - Hmm Does it matter which State the property is in? In this case we have 2 scenarios

1 - sell property in CA and buy 2/3 properties in NC

2 - sell property in CA and buy multi unit in CA or NC

In both the cases it should be equal or greater than sale price

[Joe Homs]

@Sri Voodi  Equal or greater value combined is OK and also any state.  1031 is not state specific.

[Sri Voodi]

Quote from @Joe Homs:

@Sri Voodi  Equal or greater value combined is OK and also any state.  1031 is not state specific.

 Thanks. That's what I thought. Thanks for confirming. 

[Erik Estrada]

Quote from @Sri Voodi:

Quote from @Erik Estrada:

Quote from @Sri Voodi:

All gurus, 

I have a Single Family Home (SFH) property that I want sell and do a 1031 exchange.

Scenario 1 - Sell the property and buy 2 SFH's out of state. Does it qualify as LIKE-KIND property?

Scenario 2 -Sell the property and buy a Multi unit? Does it qualify as LIKE-KIND property?

Thanks

 Hey Sri, 

Are the purchases out of state going to be equal or greater to the sales price?  - Should be greater

Is the Multi Unit going to be in the same state? and equal to or greater than the sales price? 

Are the purchases out of state going to be equal or greater to the sales price? - Should be greater. I plan on buying 2/3 properties where the combined value should be equal or greater than Sale price. 

Is the Multi Unit going to be in the same state? and equal to or greater than the sales price? - Hmm Does it matter which State the property is in? In this case we have 2 scenarios

1 - sell property in CA and buy 2/3 properties in NC

2 - sell property in CA and buy multi unit in CA or NC

It does not matter, but just wanted more context for your scenario since there is a timing period to identify the replacement property. You should be fine. 

[Steve Wolterman]

Sri, you can sell the SFH and replace it in a 1031 with either: (i) 2 or more SFH from different states; or (ii) a multi unit from any state. If total value of the replacement property(ies) equals or exceeds the adjusted sales price of the SFH, you will be able to fully defer your gain. SFH, multi units, duplexes, office space, industrial space, vacant land, and other real property held for productive use in a trade or business is all like-kind to each other in the 1031 world and can be exchanged for other real property in any of the 50 states and most territories.

[Dave Foster]

@Sri Voodi, the two phrases you will hear and want to pay attention to are

1. Like kind - This simply means that it is real estate.  All types of real estate are like kind to all other types of real estate.  Sell SF and by commercial or sell SF and buy MF.  All real estate qualifies as long as it is US property for US property (or a couple of US territories) or foreign property for foreign property.

2. Qualified Use - Use that qualifies a property for a 1031 is that your intent in purchasing the property was to hold for productive investment use.  A fix and flip would not qualify because your intent was to resell.  If you're a builder you cannot use 1031s to sell a new build because you are treating the new construction as inventory.  A rental property whether short term or long term, farm land, the building where your business operates, land in the path of progress you intend to hold until progress catches up, etc, all of these are examples of qualified use.

The number of properties also does not matter.  You can sell one and buy several.  Or you can sell several and buy one.  As long as it is investment real estate.  And as long as you meet the timelines and purchase at least as much as you sold you will indefinitely defer all tax.

[Bernard Joseph S.]

@Sri Voodi You've gotten very informative responses here. Having gone through a 1031 recently I highly recommend the guy who posted above me @Dave Foster as your qualified intermediary. He is a wealth of information and his people did a great job handling my exchange. Best of luck to you