1031 Exchange temporary placeholder, delay?

Question

I'm selling a property that closes at the end of the month and will have close to $500k in proceeds. I think there will be more opportunity next year to reinvest and I should have more time to find deals. I'm looking for some creative strategies on where to park this money for the next 6-10 months. Basically I don't want to pay taxes on it now but want to have it available sometime next year. Any ideas?

Mark H. Porter · Answer

1031 with @Dave Foster.  180 days until you have to close on something else.

Dave Foster · Answer

@Amit M., That won't work because any property you purchase must be on the 45 day list.

Amit M. · Answer

How hard is it to identify some properties within the 45 day period, but choose something else to close on within the 180 day period? That can buy you 6 months if feasible...

Dave Foster · Answer

@Ian Berg,  The problem with a short term place holder (just a few months) is that it becomes hard to demonstrate your intent to hold the replacement property for investment use.

About the best you can do in a 1031 situation would be to close at the end of this month and start your exchange.  Dont turn in a 45 day identification list.  when you don't turn in a list your exchange dies at day 46, you get your proceeds back and your gain is recognized.  But because you receive the proceeds at the end of your day 45 you receive them in 2021 so you can report as an installment sale and defer actually paying the tax until April of 2022.

So you can defer the tax at least a year.  And like @Mark H. Porter said, you may get lucky and actually find something that works for you.  All for the price of an exchange to kick the can down the road and keep your options open.

Mark H. Porter · Answer

Ian , there’s a bunch there already.  I’m looking at NNN commercial at caps over 7, solid office class A at 8.  Don’t let some of these things pass you by.

Ian Berg · Answer

Yes but only 45 days to identify. With the moratorium on foreclosures it will be well into the new year before the real opportunities surface. Looking for a placeholder until then.

1031 Exchange temporary placeholder, delay?

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