All Forum Posts by: Bill Exeter

Hi @Victor Fu, 

Yes, I can refer you to some. PM me your email address and what area you live in. You need to make sure that you work with an individual that is licensed as a securities registered representative. The DST is a hybrid investment vehicle that is sold as a security through a registered representative, but is treated as a purchase of real estate for tax purposes and qualifies for 1031 Exchange treatment.

You should be careful with the tax-deferred REITs reference above.  The upREIT referred to generally includes provisions where the sponsor can sell the property that you exchange into and trigger your taxable gain whether you like it or not.  Some upREITs have guarantees that the sponsor will not sell and trigger your gain for a certain period of time.  The upREITs have their place and have some great benefits, but you have to be aware of the risks involved as well.  

Hi @Moses Vuma, 

The member of the LLC must be your IRA Custodian. Remember, the IRA is owned by your IRA and not you personally. We use Exeter Trust Company as Custodian for IRA No. XXXXXX.

Hi @Chris Ng, 

Yes, option number one is absolutely simpler, less complicated and less costly.  However, it all depends upon timing.  It works great if you can get all of your replacement properties to close at the right time.  Option number two is really a back-up strategy when some of the replacement properties close before and some after the sale of your relinquished property. 

Hi @Dhiraj Chhabra, 

The sale of a primary residence or a property acquired with the intent to use as a primary residence will not qualify for 1031 Exchange treatment.  Properties must be held for rental, investment or business use to qualify for 1031 Exchange treatment.  The issue boils down to your intent.  You would need to provide under audit that you had the intent to hold the property for rental, investment or business use.  

The answer to your other questions is you must acquire one or more replacement properties that are equal or greater in value than what you sold.  The amount required to be reinvested would be $1.5 million less certain routine selling expenses.  

Hi @Chris Ng, 

Yes, there are a number of ways to acquire and/or sell multiple properties through a Reverse 1031 Exchange.  

(1)  You could acquire and "park" legal title to all of the replacement properties with the Qualified Intermediary and then sell your existing relinquished property.  

(2)  You could acquire and "park" legal title to one of the replacement properties with the Qualified Intermediary and then sell your existing relinquished property.  The sale of the relinquished property could be bifurcated or allocated so that some of the sale is allocated to the Reverse 1031 Exchange. This would wrap up the Reverse 1031 Exchange.  The balance of the sale of the relinquished property would then be allocated to a brand new Forward 1031 Exchange so that you could acquire and exchange into the DSTs.  This is actually two separate 1031 Exchanges linked together; a Reverse 1031 Exchange followed by a Forward 1031 Exchange. 

There are other potential variations as well, but it gives you an idea. 

Hi @Mike Le, 

IRS Form 8824 is filed in/for the year in which you completed the 1031 Exchange. The taxable sale today does not require IRS Form 8824.  This would merely be reported as a taxable sale. 

Hi @Teresa Wang, 

It all boils down to your intent.  Can you demonstrate under audit that you bought the property with the intent to hold for rental purposes, or did you buy the property with the intent to tear down, rebuild and then sell (flip), which would be considered held for sale rather than held for investment and not qualify for 1031 Exchange treatment.  The IRS could also take the position that your intent changed from held for rental to held for sale.  You should discuss with your tax advisor as to your intent and how defensible your position is. 

Hi @Amy Zemser, 

Your gross sale price is $400K.  You are permitted to subtract routine selling expenses like your broker's commission, title, escrow, recording fees, and documentary transfer taxes to arrive at your Net Sale Price, which will be approximately $375K (ish).  The Net Sale Price is the magic number; its the amount that you need to acquire to defer all of your taxes.  

You can acquire a replacement property for $200K and then structure an Improvement 1031 Exchange.  The Qualified Intermediary would acquire and hold or "park" legal title to your new replacement property on your behalf so that you can have the rest of your 180 calendar day exchange period to make the necessary improvements to get your cost in the property up to $375K (ish).  

It is not the fair market value that counts; it is the cost of the purchase plus the cost of the improvement that determine your reinvestment amount and whether you have satisfied your 1031 Exchange reinvestment requirements.  

Hi @Justin Holley, 

The location of the Qualified Intermediary does not really matter.  It is their experience, expertise and government or regulatory oversight that really matter.  

Hi @Ramiro Rodriguez, 

Yes, you can certainly do this.  These transactions are all about timing.  The builder must ensure they complete the new build in time so that you can close on the purchase of your new build replacement property within your 180 calendar day exchange period.  The 1031 Exchange would become a failed 1031 Exchange and you would pay the taxes if you are unable to close on the purchase of the new build in time.