1031 Alternatives for back to back escrow deal

Los Angeles County, California
1031 Exchanges
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1031 Alternatives for back to back escrow deal

Noa Zell
Member since 2024 · 5 posts · 3 votes

Are there any good alternatives to a 1031 exchange for a back to back escrow deal, since the property in question will never be under my name? I have an option to purchase at an attractive price but would rather not bring cash to the transaction. I am looking to secure a buyer and close with both parties in escrow. How can I avoid capital gains tax if at all?

Any first-hand information on DSTs of 731s would be helpful, or any other creative ideas that could make this deal profitable.

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  • Noa Zell
    OP
    Member since 2024 · 5 posts · 3 votes
    2y

    Note that the property is a commercial property

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Nope. You aren’t going to convince the irs you bought a property as an investment if you sell it the same week. They’re going to call you a “dealer” and count your real estate as inventory. You’re going to face the maximum taxes possible. State and federal and maybe self employment. 

    You alternatives are hold for a year to only pay capital gains tax. Move in to it and fix it up and stay there for 2 years to be tax exempt. Anything less than a year is penalized. 

    Ps. Ignore the move in I see your second post saying commercial. So hold for a year and fix it up would get you down to just capital gains tax. 

    1Reply
  • Noa Zell
    OP
    Member since 2024 · 5 posts · 3 votes
    2y
    Quote from @Bill B.:

    Nope. You aren’t going to convince the irs you bought a property as an investment if you sell it the same week. They’re going to call you a “dealer” and count your real estate as inventory. You’re going to face the maximum taxes possible. State and federal and maybe self employment. 

    You alternatives are hold for a year to only pay capital gains tax. Move in to it and fix it up and stay there for 2 years to be tax exempt. Anything less than a year is penalized. 

    Ps. Ignore the move in I see your second post saying commercial. So hold for a year and fix it up would get you down to just capital gains tax. 

    Thank you Bill!
    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    2y

    @Noa Zell, The 1031 is out because your intent is not to hold for productive use.  And no go on capital gains tax either.  You'll pay ordinary income tax.  

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