Can 1031 Proceeds be used to fund a lease option or a fractional ownership?

3 posts by 3 users

Medium 1431824892 avatar brokersb Sandy Blanton
Property Manager from Pensacola, FL
218 Posts
44 Votes
3 Awards
Medium 1399502465 avatar stevenhamilton Steven Hamilton II
Tax Accountant from Lake Villa, IL
3783 Posts
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Sandy Blanton

Property Manager from Pensacola, Florida

Feb 05 '13, 07:01 PM

We have 1031 proceeds in escrow. We have a property located, but the proceeds aren't enough to cover more than 1/2 the cost of the property. The seller has expressed interest in being creative by us giving our proceeds as a lease option towards the property. OR buying 50% of the property and remaining partners until we have funding to buy out his half. I'm quite sure the fractional ownership is okay, but is the lease option idea feasible while accomplishing tax deferral of the capital gains. Thanks for your input. @Steven Hamilton II

Medium 1448388825 avatar stevebabiak Steve Babiak
Real Estate Investor from Audubon, PA
11751 Posts
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Steve Babiak Verified

Real Estate Investor from Audubon, Pennsylvania

Feb 05 '13, 07:14 PM
2 votes

Exchange must be "like kind" to defer the capital gains. Do you have a 1031 QI that you use? I would ask them to get their opinion. But I'll guess that if you own real estate (have a deed), and want to exchange that for a lease, then that doesn't seem to be "like kind" enough to me. Getting a deed to another property, even if financed, seems like it would be OK.

Steven Hamilton II Verified Moderator

Tax Accountant from Lake Villa, Illinois

Feb 05 '13, 11:22 PM
1 vote

@Sandy Blanton,

Have the seller carry the note on the remaining portion.

As @Steve Babiak said a lease option is not like kind.


Medium hta logoSteven Hamilton II, Hamilton Tax and Accounting
E-Mail: [email protected]
Telephone: (224) 381-2660
Website: http://www.HamiltonTax.Net

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