Changing Title After 1031

2 Replies

Father and two daughters bought a house through 1031 exchange. Title is held as tenants in common, 50% father, 25% each daughter. Exchange was completed a couple of months ago. Would there be an IRS issue if father removed himself from title now? Would there be an IRS issue if two additional daughters were added to title?

@Yvonne Ruiz not so much a 1031 issue as it is an issue of gifting.  My guess is that Dad needs to tread carefully to avoid a gift tax situation which would negate the benefit of the 1031. There's some work arounds our esteemed CPAs here can speak to.

Dave is right (of course!).

I bought a house from a CPA whose mother gifted it to her in 6% chunks over many years. The current gift limit per year without doing an IRS Form 709 is $15k.  The 709 from what I understand will basically debit his $5.6M lifetime estate tax exemption.  Probably easy for a CPA to do.

Doing it wrong will cost the gifter 55% in gift tax so glad you are asking the question.

Of course heirs will inherit at a stepped-up basis, so weigh whether doing all this so they will be taxed eventually at dad's basis is even worth it.