Help! I'm on Day 45 of my 1031 Identification period and just thought to ask this...

[Jim Hwang]

Hello BP community,

I am about 11 hours away from letting my 1031 exchange fail after much back and forth.  To defer all taxes, I would need to reinvest at least 250K.  Currently, my QI is holding about 110 in capital, meaning I would need to replace 140K in debt.  Taking on new debt at current interest rates is a large reason I was ready to let it fail, until literally an hour ago when I thought, "Can I use seller financing to replace that debt, presumably at a much lower interest rate?"

A follow-up to that is whether or not I could list my mother's SFH as a replacement property and then have her be my "bank". The sticky part here is twofold: she was the co-owner of the relinquished property, and her SFH is what I have listed on prior tax returns as my primary residence since at the time I was living abroad. Since August 2022, I have lived in Idaho and so her SFH would technically be an investment, or so I would hope.

[Dave Foster]

@Jim Hwang, There's a hidden benefit to you that your QI may not have told you about.  Since your sale was in 2022 and you did not receive the funds until 2023 you have the opportunity to delay paying that tax another year.  The IRS gives you the option in a failed 1031 exchange that goes across tax years to treat the sale as an installment sale with the proceeds received in the next year.

The impact for you is that if your accountant files it as such you will not owe the tax until April of 2024