Real Estate Swap Experience?

Question

I'm thinking of offering 2 duplexes (free and clear) to trade with an RV Park.  Is there an advantage to doing this this way?  Any tax savings?

There is a small debt on the RV park which we would take "subject-to", but other than that, the values work out to be about the same.

(Divorcing couple ran the RV park for years and can't stand to think about doing it in the future.  This allows them to have 2 separate properties and go on their merry way.)

Dave Foster · Answer

@Jean NortonUnless structured as a tax deferred exchange you and the park owner will recognize gain and have a taxable event even though you are trading properties.  The modern 1031 involves a sale followed by a purchase.  But the old way of doing things is exactly what you are contemplating.  It can be done but needs some finesse to get the correct calculations and documentation together.  It's a very easy and inexpensive matter to structure this as a 1031 and to give your cpa the necessary information to report on your taxes.

Meagan Barkley · Answer

Google 1031 exchange. There will be a plethora of info. The debt shouldn't cause a tax issue for you, but may for the park owners. It will be "boot" (a fun tax term) for them since they will be relieved of the debt. You may consider hiring a CPA to help out with the tax implications and reporting requirements.