1031 Exchange a property from a family member

Rental Property Investor · Houston, TX · Member since 2019 · 184 posts · 147 votes

Hi BP friends. I hope everyone is having a wonderful day. I need some guidance here as I am not very familiar with the 1031 Exchange process. Can you actually buy a property from a family member using a 1031 exchange? Basically, let's assume I am selling a property and my next property is from a family member. Are there any rules for this? is it possible? Any guidance, reference articles, documents are very much appreciated. Thank you so much!

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Rick MartinPro Member
Rental Property Investor · Redondo Beach, CA · Member since 2017 · 411 posts · 477 votes
5y
@Alex Ramirez I don’t think it is a problem as long as it is a like real estate investment.
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Alex Ramirez
OP
Rental Property Investor · Houston, TX · Member since 2019 · 184 posts · 147 votes
5y
@Rick Martin thank you very much for the feedback.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y
@Alex Ramirez, There is nothing statutorily against buying your replacement property from a related party. However over the years the IRS has been very suspicious of such arrangements because of the opportunity for friendly parties to structure sales prices to shift the basis to benefit the exchangor. There are a number of cases where these exchanges have been disallowed. However, again a large number of CPAs maintain that the practice can be done as long as it is arms length and documented well.
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Alex Ramirez
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Rental Property Investor · Houston, TX · Member since 2019 · 184 posts · 147 votes
5y
@Dave Foster very interesting. Thank you so much for the feedback
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