Selling a property I bought under a land contract into a 1031

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Selling a property I bought under a land contract into a 1031

Caleb Franks
Member since 2020 · 6 posts · 2 votes

I acquired portfolio of properties under a land contract in January 2021. It is a recorded land contract, which gives me full authority over the properties. One of the properties does not fit my goals or criteria well, and I'm considering selling it. Since it's under a land contract what are my options as far as doing a 1031 exchange, or other ideas to lessen the tax burden. Realistically I'm only looking at about a $10k profit after all expenses. 

Thanks! 

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

    Hi @Caleb Franks, 

    If you did not do a prior 1031 Exchange into these properties and your combined taxable gain is only $10,000, you may not want to worry about doing a 1031 Exchange.  You will likely pay about 50% of your tax liability in a 1031 Exchange fee.  

    Having said that, if you still want to proceed you can do a 1031 Exchange with property acquired and held under a land contract but it gets a little tricky.  Generally, under a land contract legal title is still held by the original seller of the property and is not conveyed to you as the buyer until the underlying debt it paid off.  Prospective new buyers would have to address that issue.  

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