Looking for a “parking lot” on failed 1031 Exchanges?
NOTE: This post assumes background knowledge of structured sales. If you are unfamiliar with structured sales, please review previous posts (Selling Real Estate or a Business? Consider a tax deferred income stream.), our website, or contact us direct (312.529.4017).
If you are a 1031 Exchanger, you know 180 days can go by in an instant. As many of you know we help exchangers with a tax deferral strategy through our 1031 Exchange Fall Back. With that in mind, remember the primary goal was to 1031 Exchange but could not find the appropriate property, or had an eye on that special property that could not close in 180 days (or ID in 45 days.)
Ahhh, now If only you could park those proceeds on the sideline until you were ready.
Well, you can.
Allow me to introduce your “parking lot”. So let’s say you had every intention of using that $1,000,000 to exchange into another property and it didn’t happen. Why not put those proceeds into a tax deferred structured sale (fall back from a 1031 Exchange), and allow those proceeds to build tax deferred. Now, when that special property comes available down the road, you can take a line of credit up to 97% of those proceeds ($970,000 in our example) to purchase the asset.
In essence, you created a tax deferred parking lot. Call us to talk through your own specific scenario.
Chris Princis
[email protected]
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