All Forum Posts by: Stacy Tring

@Dave Foster Thanks so much for detailed reply. So it sounds like a seller credit isn't automatically treated as boot on either half of the transaction; it simply affects 1) the net proceeds you receive as a seller (and thus the amount you must buy), and 2) the replacement value that the new house will count as when determining if you fully spent the net proceeds? Nothing is evaluated as cash boot until the end, after you compare #1 to #2 to see which one is greater?

Hi all, 

Would like to check my understanding on how a 1031 exchange is affected by offering or receiving seller credits. 

More specifically, I am wondering about seller credits for closing costs and seller credits for repairs. I know that seller credits for security deposits, property taxes, and rent should be handled outside of escrow. In the below scenarios, let's assume that all relinquished properties are paid off in full, so we are only potentially dealing with cash boot and not mortgage boot.

WHEN SELLING MY RELINQUISHED PROPERTY:

1A) If I offer a seller credit, does that simply reduce the net proceeds I have to spend on my replacement property? For example, if my sale price plus standard closing costs is $300,000 and I offer a seller credit $10,000, does that simply mean I have to buy property valued at $290,000 to defer all tax and not have any boot? 

1B) Does the answer change if it is a credit for closing costs vs a credit for repairs?

WHEN BUYING MY REPLACEMENT PROPERTY:

2A) If I am offered a seller credit,does that simply reduce what "spend value" the replacement property will count as when checking to see if I spent all my 1031 proceeds? For example, assuming I have $290,000 that I have to spend from 1A above, let's say I put in an offer of $300,000 on a new place and end up getting a $15,000 seller's credit. Does this simply mean I am deemed to have "spent" $285,000 of my proceeds and thus have $5,000 in cash boot that I need to pay tax on?

2B) Does the answer change if it is a credit for closing costs vs a credit for repairs?

GENERALLY:

3A) Since your cash boot is basically what you still have left after buying your replacement property, you won't know your boot total until the whole exchange is done right?

Thanks in advance for any clarification you all can provide!

Thanks for pointing out my mistake!

Hi everyone, 

Do my calculations look correct on the potential tax savings I would realize ($116,238.98!) if I did a 1031 exchange? Thanks in advance.

Hi all, 

My relative wants to combine their $500K personal exemption & a 1031 exchange to liquidate their rental properties without paying taxes, but they are worried about missing the180-day time limits for the 1031 exchange, so they want to involve their son-in-law (SIL). My understanding is that in-laws are not considered a related party for the purposes of 1031 exchanges.

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My relative is asking if this is a viable way to legally avoid having to pay taxes:

STEP 1: SELL PRIMARY RESIDENCE (House A)

-Sell primary residence to son-in-law for cost basis + $500K

-File gift tax form for difference between sale price & market value

-Not pay capital gains on $500K due to personal exemption.

STEP 2: SELL RENTAL PROPERTIES

-Do 1031 exchange and buy House A back from son-in-law

-Rent out House A for 1 year before move back in

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Thoughts? What timelines would they need to be aware of? Thanks in advance.

My understanding is that most lenders will file a mortgage lien on the subject property as soon as the loan is signed so as to preserve their rights, but what if the lender did not do so before the borrower defaulted? Can the lender still file the lien after-the-fact as long as the promissory note clearly indicated that the intent was for the subject property to be collateral?

Three people signed the rental agreement, which states all tenants are joint and severally liable. It also states that any security deposit refunds owed will be made payable to all parties on the lease agreement.

One tenant has stopped contacting the roommates and us, and we are not sure they are planning to return. We do not suspect foul play because apparently that tenant's relatives have reported to the remaining tenants that the MIA tenant has moved in with another relative (but did not give that MIA tenant's new contact information). 

Our local statute specifically says: "the tenant shall not be considered to be absent from the dwelling unit without notice to the landlord during any period for which the landlord has received payment of rent." Since the remaining tenants have still been paying, I'm not sure that I can treat the MIA tenant as absent.

Let's say the remaining tenants decide to move out (probably because they will eventually have trouble paying) and I make the refund check payable to all the tenants per the rental agreement (and to protect myself against claims from the MIA tenant), but they can't cash it because they can't reach this third roommate.

Any recommendations on what to do with the money or what course of action to take? Thanks in advance.

Hi all, I want to get out of the real estate game and do a 1031 exchange to roll my equity into a home that I will eventually live in after the 2-year required rental period. Besides hiring a realtor to do a traditional listing or selling to a "cash for homes" company, what other options might I have for finding potential buyers? I don't have a network of investors I am part of, and honestly I don't think these properties are especially well-suited for an investor. It is far more likely that a first-time homebuyer is going to buy as their primary residence. Just exploring my options. Thanks.

Thank you for your response! So it sounds like the two cousins have to split everything 50/50 unless they have some sort of partnership agreement in place? It just feels weird to treat it as a partnership because a primary residence isn't a business. 

Cousin A just basically wants to cash out their equity on half the house, whereas Cousin B needs to get a property they intend to rent out. It would just be so much easier to let B report all income/expenses than to have A & B split everything but A also pay B rent!

Cousin A currently lives in one half of their primary residence and rents out the other half.

Cousin B has a rental property they want to get rid of by doing a 1031 exchange.

If Cousin B buys 50% of Cousin A's house as tenants in common, can A & B essentially switch over the rental income to B, whereby B reports all rental income and expenses on their taxes and A reports no rental income and expenses? Or, do A & B have to report all rental income and expenses 50/50?