Cannabis 1031 —> How Much Can I Buy?

[Casey Kornoelje]

I've entered into an LOI to sell owner occupied commercial real estate (special land use permitted cannabis property) that I've held for about 18 months. The sale will create a sizeable gain that I intend to 1031 to avoid taxes.

It's not clear to me how many properties I'm eligible to 1031 with the sale proceeds. I'm personally more comfortable with SFR or a 4 plex vs a 50+ multi family.

Can I 1031 the 1 commercial (cannabis) retail building and purchase 20 SFR? Assuming all sale proceeds go towards the SFR. 

[Bill B.]

You have to identify the exact addresses of the properties you plan to buy within 45 days of your sale. You must close on those properties within 135 more days. If you identify more than 3 properties that add up to more than 200% of your selling price then you have to buy 90% of them or your exchange fails and you owe all the taxes. If you identify 20 homes and only buy 17 you owe 100% of the taxes. And of course you must reinvest 100% of the “cash” you receive or it will be taxed. 

Other than that your plan is fine.  contact @Dave Foster before you close on your sale to ensure you never have constructive access to the proceeds or it’s too late.