1031 Question

[Arnie Guida]

The old property has to be sold first, then the new one bought, right?

I've found a 4plex I want to buy, and could buy it normally, but I have a SFH(rental) I wouldn't mind selling. I doubt I could sell the SFH in time before closing on the 4plex.

Is there any way to sell a property "after the fact" to qualify for the 1031 Exchange?

Thank you,

Arnie

[Steve Babiak]

As @Wayne Brooks has mentioned, you could consider a reverse 1031 exchange where the QI acquires and holds title on the replacement during the time where the relinquished property is being sold. There is still a strict timeline that must be followed. Also, the QI must be involved in this basically from the outset in order to defer capital gains.

Now, let's consider the reason for doing a 1031 exchange; the purpose is to defer capital gains taxes. Which implies that the SFH that you are looking to relinquish has gone up in value during the time you have owned it, and that the increased value exceeds the value of improvements. If there is no significant gain in value, then the cost and strict rules in doing a 1031 exchange might not make that a sensible approach to take.