To be clear, this simple mortgage exchange is in fact not a land contract, correct, since the title would not be held in escrow, this right?

The excess, if any, is generally held for the borrower to claim.So, in most states, when a property goes through the auction, the subordinate liens are wiped out. (22nd mortgages, HELOCS, HOA liens)However, when no auction is held, (you buy the property before the auction occurs) the liens survive and are still owed.

The funds in this case were likely held in their individual name, and a death, bankruptcy, or other could affect the ability to close out and complete the 1031 exchange.The safety and protection of exchange funds should be of utmost importance, which is why you should always work with a qualified intermediary that has some sort of regulatory oversight; not just an internal audit or something, but real regulatory oversight with an outside, independent regulatory audit. 

The family member has held the buildings for decades and managed on his own, but he is 80 years old with health declining and cannot properly manage them anymore.

I held my license at a similar brokerage for a couple years before I started my own. 

Hey Lamar when i started investing in 2008, I was scared sh&*less.It took me 18 months to do my first deal.Fast forward to 2011 and we've averaged over 100 flips per year on average since.The biggest thing that held me back was that I thought I had to learn everything first. 

You’re noticing exactly what a lot of active investors are seeing right now (banks are moving slower, underwriting is stricter, and deals that looked easy a year ago can get held up fast).

Your CPA might be calling it capital gains, but the IRS likely sees it as business income unless you held the properties long-term.2.

The remaining gain, after subtracting the recapture portion, is treated as a long-term capital gain if you’ve held the property over a year.So, in short: The amount you owe on your loans doesn’t affect your gain or taxes.The taxable gain is based on your adjusted basis, not your equity.You’ll pay tax on depreciation recapture and on any remaining capital gain.It might be worth having a tax pro run the exact numbers since even small details (like improvements or refinance costs) can shift the outcome.Thank you!

@Stuart UdisGreat post & I concur that this is a very valid list that many people get held up on.