All Forum Posts by: Whitney Nash

Hello @Mike Nas

What you wrote is essentially correct. While there is no formal "approval" process involving the IRS/govt during an exchange, all of the steps, people (QI), and documents involved in executing an exchange are required formalities. They MUST be apart of the formal exchange process or it doesn't exist and will fail. As @Jeff Nash explained, when filing their taxes and reporting the exchange on Form 8824 the CPA/tax preparer will need a copy of the exchange documents, closing statements (which also have 1031 language on them), etc. to report it properly. If not reported properly the likelihood of an audit increases. Also, a qualified intermediary helps the client execute an exchange according to the rules/laws to help mitigate any potential for a future IRS disapproval. They will make determinations/give advice along the way that are essentially approvals/disapprovals so that the client doesn't do something that they shouldn't which could cause the exchange to fail and be taxable. 

Hello @Andrea Smith

If the farmland has been 'held for investment or use in a trade or business for a period of time' you can 1031 the funds into 'like-kind real property' if it will be held the same way. Multifamily homes qualify as like-kind to the land. 

You would still want to talk to a QI in detail about your situation and what you are trying to accomplish to confirm that it qualifies for a 1031 exchange and that it is feasible. 

Hello @Mary El

No, you cannot 1031 into the actual business itself. But @Chris Picciurro is right, if "real property", such as the building itself, is part of the purchase of the business, then you can use 1031 funds for that part of the purchase because it will satisfy the "...or use in a trade or business" requirement. If no real property exists as part of the purchase, such as with an online-only business, then no can do.

Hello @Jonathan Moonen,

DSTs, as previously stated, are often a good alternative to 1031'ing into something other than physical property. 1031'ing into oil and gas mineral rights could also be an option if they are "1031 friendly". There are certain net worth requirements and minimum investment amounts that you'll want to ask about when looking at different DST and O&G companies and offerings.

You may also want to look into purchasing vacant land as replacement property as well since price points can be less than a house depending on size and location.

Hello @Jon Simmons

I would agree with @Jeff Copeland. In these situations, I recommend that my exchange clients do a warranty deed/quit claim deed to add their spouse to the relinquished property so that they can sell together and buy together. A spousal transfer like that shouldn’t be an issue…IMHO.

Taking this step before you list the SAT property is probably your best, and easiest, bet to accomplish your goal. 

Still not doable. Since the current QI is the one you used when selling the relinquished property(ies), they need to be the one to facilitate buying ALL of your replacement properties. You can use someone else next time... 

If you have questions or concerns about your current QI I would be happy to discuss them with you to maybe explain it from another QI's perspective, etc. Just message me. Happy to help.  

Hello @Vincent Pal-Freeman

Unfortunately, no this cannot be done. The way the regs read…the party that acquires the relinquished property from taxpayer (the current QI) needs to be the party that delivers the replacement property to taxpayer. QIs looked at this when the real estate bubble burst in '08 and some exchange companies failed. Even in that circumstance, other QIs couldn’t step in. Sorry! 

If you are going to roll the proceeds into another 1031 exchange, then as a QI, I would say that you can sell now. Also, since your intention at the time of purchase was to hold it for investment and you have made efforts to rent, and not sell, that is in your favor as well. 

As a QI, I can confirm that the other answer is correct, there is no required minimum to put into and use for a 1031 exchange. You just want to make sure that the cost to do the exchange (fee to the QI) is less than the amount of tax that you would be deferring. In your case, it would be worth it to do a forward exchange. Also, I've had clients put much less into an exchange and would never dream of laughing at them/the amount. I don't know a QI who would, so don't worry about that. :) 

With the information provided, I would advise my 1031 clients the same way your tax attorney advised you. Wait 24 months for the safe harbor. That said, keep in mind that in the event of an audit, a key consideration that the IRS uses when determining if a 1031 is valid is what the intention was when you purchased the property with 1031 funds. Was your intention to hold it for investment for a "period of time" (generally 2+ years)? And, was turning it into a personal residence something that only came up recently because of your job change that you weren't expecting at the time of purchase? If the answer to both questions are 'yes', it is my opinion that you should be OK to move in after the 24 month mark. There are additional considerations as to tax that could be owed when you decide to sell the property after it being a rental and personal residence, but that will depend on the timing of things, how long you live in it, etc. and is another conversation.