1031 Exchange - Investment property in other countries

1031 Exchanges
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1031 Exchange - Investment property in other countries

Al Skerrett
Member since 2020 · 10 posts · 5 votes

I figured I'd check with the pros on this one... Can you do a 1031 exchange when selling here in the states and buying in the Bahamas? Exploring all my options these days with the rising prices here in the states... Any info is appreciated...

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Bill ExeterBusiness Member
1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
5y

Hi @Al Skerrett, 

@Bill B. is right on the money.  You can sell foreign property and 1031 Exchange into other foreign property, but U.S property must be exchange for other U.S. property. 

Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    Not another country. Your closest examples would be USVI, Guam, and Northern Mariana Islands but for some reason not Puerto Rico. IMHO the USVI is your best option. But there’s only 3 and St. John is 1/2 national park and very expensive. So you have St croix and St Thomas. 

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  • Bill ExeterBusiness Member
    1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
    5y

    Hi @Al Skerrett, 

    @Bill B. is right on the money.  You can sell foreign property and 1031 Exchange into other foreign property, but U.S property must be exchange for other U.S. property. 

    Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
    WebsiteView Page
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  • Jeff Wagner
    Real Estate Broker · St. Thomas, USVI · Member since 2019 · 33 posts · 26 votes
    5y

    @Al Skerrett  Another tax advantage to consider is that tropical US territories also have Opportunity Zones.  My thought/opinion ( I am NOT a tax expert)  is that it could be advantageous to 1031 into a new property within an Opportunity Zone to protect against the 1031 provision going away under the new administration.  My understanding is that a property held for at least 10 years will not be subject to capital gains tax.  I'm a broker/investor in the USVI.

    https://www.fool.com/millionac...Capital gains exclusion: If the opportunity fund sustains the investment over a period of 10 years, the capital gains made from the opportunity fund itself are permanently excluded from capital gains taxation. This is by far the most significant benefit and can meaningfully enhance the total return to investors in these projects who are patient enough to hold for this length of time.

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  • Al Skerrett
    OP
    Member since 2020 · 10 posts · 5 votes
    5y

    Thank you all for the info! @Jeff Wagner I'm going to look into this for sure! I've had several of my properties for more than 10 years so this could be beneficial for me...

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  • Al Skerrett
    OP
    Member since 2020 · 10 posts · 5 votes
    5y

    @Jeff Wagner I see that wouldn't apply to existing property that wasn't invested in that way but still something to think about...

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  • Bill ExeterBusiness Member
    1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
    5y

    Hi @Jeff Wagner, 

    You cannot 1031 Exchange into a property located in a Qualified Opportunity Zone and get the benefits of the Qualified Opportunity Zone Investment (QOZ). The QOZ sponsor must structure the investment in a QOZ property through a fund. The funds are generally set-up as LLCs with multiple members in the LLC and are therefore treated as a partnership for income tax purposes. The purchase of a membership interest (partnership interest) in an LLC will not qualify for 1031 Exchange treatment.

    The QOZ can be a great strategy to "save" a failed 1031 Exchange.  At this point in time, it only defers the current gain until 12/31/2026.  

    Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
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  • Jeff Wagner
    Real Estate Broker · St. Thomas, USVI · Member since 2019 · 33 posts · 26 votes
    5y
    @Bill Exeter   Thanks for the great insight.  I like how you summarized: 

    The QOZ can be a great strategy to "save" a failed 1031 Exchange.


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