1031 Exchange related parties

[Casey Kernan]

My mom purchased a SFH for investment purposes and my husband and I have been renting from her. She bought the property doing a 1031 exchange using the trust that I am a beneficiary of. My husband and I are not looking to buy our own property yet. can my mother sell the property we are currently in and buy a slightly more expensive property that we then would rent, again by a 1031 exchange. My husband and i have been in the current home >2 years.

[Dave Foster]

@Casey Kernan, If you boil the situation down you and your husband rent a property.  Can the landlord sell the property you are renting and buy a new property that you would also rent?  The answer is yes.  However your mom needs to make sure that she can demonstrate her investment intent on the new house.  She can best do this by treating you at arms length.  Have a lease with you.  Charge, collect, and report the market rent.  Use depreciation and other writeoffs to offset the rent income.  And if she wants to, use the annual gift limits to give you back some or all of the rent you paid.

There shouldn't  be  a related party as long as she treats you at arms length as a landlord.