CPA familiar with 1031?

Question

Hi, I'm planning on doing a 1031 exchange. A good friend who is also a broker recommended finding a CPA to work out the number (unfortunately she doesn't know one herself). Does anybody have a recommendation?

Dave Foster · Answer

@Darren Chang a little more bad news for you.  It's not just that you have to take title to the real estate to be eligible for 1031 treatment.  You have to have taken possession of the property with the intent of holding it for productive use. With a wholesale deal (even if you take title) your intent is primarily resale so the outcome is the same - It's not eligible for 1031.  And it's taxable as ordinary income.

Natalie Kolodij · Answer

Doing a double close won't qualify you for 1031 treatment.

Your wholesaling income will be taxed at ordinary income tax rates, subject to self employment taxes.

If you're not already working with a RE focused tax pro I would reach out to one to help generate a tax strategy that works.

Basit Siddiqi · Answer

@Darren ChangYour profile indicates that you are a wholesaler. Do you have any investment properties? Properties you intend to hold for an extended period qualify as investment properties.Only reason I mention is because wholesales properties do not qualify for 1031 exchange.There are many CPA's on the forum who are familiar with 1031 exchange. Network with a couple and go with the one you connect with the most.

John C. · Answer

I live in Queens and sold a property in OH and did a 1031 into a property in Brooklyn. You just need a qualified intermediary, not necessarily a CPA. There's a bunch of QE's you can find online. I used IPX1031.com and the transaction was very smooth. They charged me $1,000 in total.

Basit Siddiqi · Answer

@Darren ChangWebsites don't go into great detail on every scenario because there is a lot of research required. Research takes time to do and if they post something inaccurate will then be deemed unreliable. Everyone's tax situation is different.

Jessica Zolotorofe · Answer

Talk to @Simon Filip. He is a CPA and 1031 pro.

Darren Chang · Answer

Reading these posts made me realize I have a lot to learn about 1031. A question that most websites won't answer: if I live and work in NY, but my property to be relinquished is in NJ, which state capital gain tax should I pay? Each state has different capital gain rate and exemption amount.

Darren Chang · Answer

@John C.

Thanks for the suggestion, John. I'll look into the site.

Darren Chang · Answer

@Basit Siddiqi

If I understand correctly, wholesale is finding a deal and selling it to somebody else before actually closing it. If this doesn't qualify for 1031, I still need to pay tax for the profit I make, right? Would this be taxed as capital gain or normal income?

If the math is in favor of 1031, I would rather close first, then sell it. I have signed the contract and paid 20% down, but the property is a pre-sale and still under construction. It will get TCO by the year. There has already been a good chunk increase in the market value, so I want to cash out on the equity and invest it in something else.

CPA familiar with 1031?

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