All Forum Posts by: Whitney Nash

Hello @Misook Foley

As the others have stated, yes, you can 1031 between different property types, such as multi unit to SFH, to bare land, to commercial, etc., etc. They are all like-kind to each other and qualify. The other aspect that matters, though, is how the properties are used. They must also be held for investment or use in a trade or business. Were both sides of the duplex rented out? If you lived in one side personally, (even within 2 of the last 5 years) then only the numbers related to the rented portion qualify for the exchange. (The other side should fall under section 121.) Do you plan to rent out both SFHs? If one will be personal use, then it doesn't qualify either.

Hello @Jon Schwartz

@Bill B. is right, it may not be worth it to do a 1031 exchange if your gain in $25k and you'd be deferring about $3750, depending on how all the numbers flush out (and none of this is including closing costs). The exchange fee to the QI will also eat into that a little. You would be deferring depreciation recapture too, which is helpful, but again, is it helpful enough? Some people think that it is because the don't want the tax man to have any of their money, but it depends on if you think it's worth it. Per the numbers in your last sentence, it wouldn't qualify for full tax deferral because you are not exchanging up in value and would create boot. I would only do an exchange if the numbers really make sense for what you're trying to accomplish and you plan to exchange up. You may want to consult with your CPA/tax preparer.

Hello @Brandon Giarusso

If you are talking about your LLC owning 33% of the actual property itself, (I assume as a Tenants In Common (TIC) with the other investors?), then yes, you can 1031 your portion into another investment or held for use in a business property either with (if also done as a TIC) or without the other investors. If you are talking about 1031'ing your 33% interest in a partnership and the partnership actually owns the property, then no, you can't do it unless careful planning is done to set up a swap and drop or drop and swap scenario. I would need to know more details about your situation, goals and those of the other investors before advising on either of those strategies further. I would also need to know what you mean by "...since the entire entity that bought it isn't selling as a whole?" Feel free to DM me if you would like to do that.

Hello @Pierre E.

Yes, you have flexibility as to the amount of exchange funds used towards each replacement property and the amount of debt offset attributable to each, so you can have different ratios between multiple replacement properties. To comply with 'exchanging up' for full tax deferral, the amounts are seen as cumulative across all replacement properties (and relinquished properties too, if that were the case). 

Hello, @Darren Redfearn

Generally, when you do a 1031 exchange the replacement property must be 'new to you', so you cannot put the exchange funds towards something that you already own. It also cannot be used toward paying off debt on a property that you own because debt is not considered 'like-kind real property'. It may be possible to use 1031 funds to improve upon investment property that you already own, but that is a more complicated and expensive type of exchange. Since the replacement property needs to be held for investment or use in a trade or business the property being a personal residence, in your case, wouldn't qualify as is and it would need to be rented out, at least to some extent. 

Hello @Amber S.

Yes, you can sell your rental and 1031 the funds into buying the land, building a house on it to rent for two years and then move into it as your personal residence. If you have more questions about doing the 1031 exchange, please feel free to DM me.

Hello @Allen Yeung

If you want to do a 1031 exchange, scenarios 1, 2, 5 & 6 are going to be your most straight forward replacement property (RP) options. Option 3 is possible if you use exchange funds for the purchase and other funds for the repairs (otherwise an improvement exchange would be needed and those are much more complicated and expensive to execute). Then, you would still want to rent it our for a period of time; don't flip it. Option 4 can only work if the exchange funds are used to buy the real physical property that the business uses/is housed in. They cannot be used to purchase the business entity itself. Additional investment options that you may want to consider are bare land or oil & gas mineral rights. If you need further clarification or have more questions, please message me.

Hello @Daniel Sherman

For full tax deferral you would want to find replacement property (RP) that is of equal or grater value than what you sold (fair market value, i.e. sales price) not =/> than the proceeds from the sale. So, in your case the RP needs to be $325 or more. As you stated, this can be accomplished by purchasing more than one RP to reach the cumulative value of $325k, if needed. Taking a small loan to be able to purchase a property at that price or higher will help you have a fully tax deferred exchange. From the numbers, it appears that you don't have a loan on the property that you are selling, is that right? If you do, debt offset will figure into your tax deferral numbers too. 

Buying RP that is a little less than what you sold your property for happens all the time and people plan for paying tax on the small difference. If the RP is close to the $325k price, then negotiating improvements to increase it, as stated previously, could be a good option.  

Also, since it wasn't mentioned if you are already working with a QI and have an exchange agreement in place or not, I just wanted to make sure that you are aware that you do need to have that done before you close tomorrow or it will be too late to do an exchange at all.

Hello @Judson Krosney

Unfortunately, you can not 1031 into an Opportunity Zone Fund itself. You can only 1031 into an actual property that is located in the opportunity zone. You would not want to invest in a physical property in the zone without doing the 1031 as that would not provide any tax deferral benefit. If you want to invest in the Fund, you would sell and then invest the gain in the fund directly for the tax deferral benefit. Here are a couple links to learn more:https://abovebelow1031-my.shar...   and   https://nashionalfinancial-my....

Other like-kind investment options that may not be inflated right now depending on location, etc., would be land, DSTs, oil & gas mineral rights, etc. 

Hello @Patricia Andriolo-Bull

Unfortunately, you can not use 1031 exchange funds to purchase a primary residence or to purchase something that you already own (regardless if it's through an LLC or trust that you have ownership, control, etc. of). The replacement property must be new-to-you and both the relinquished and replacement properties must be held for investment or use in a trade or business for a period of time.

Regarding your primary residence in FL. If you have lived in it for at least 2 of the last 5 years, you can sell it and retain up to $250k (if single) or $500k (if married flinging joint) in gain without owing any tax on it because of the Section 121 exclusion. Any gain over those amounts would be taxable.