Kentucky to Tennessee Rental Exchange

[Nick Murray]

I am selling a rental home that I own 50% of in Northern Kentucky (just south of Cincinnati). I want to execute a 1031 exchange for a rental home in Chattanooga. I have read about them online, but am looking for particulars on how I should actually go about executing one? Do I need to hire a lawyer, or deal with a certain company, etc.

The home I am selling in KY is worth about $250K ($125 since I own 50%). I will pay taxes on the appreciation and deprecation I've written off on it in the past 3 years of owning it. I want to avoid this by doing a 1031 for a multi-unit or SFH in Chattanooga TN for equal or higher value (I think that's a rule). Please advise.

Nick

[Dave Foster]

@Nick Murray, if you own that KY property as a tenant in common with someone else then you're in great shape.  You can sell it and do a 1031 on your 50% and purchase something in TN and defer all gain and depreciation recapture.  

If the other owner wanted to they could do the same with their 50%.  Or the two of you could go together and exchange for 100% of the sale.  Or you could do your exchange and they could take their cash and pay their tax.

There's some very strict guidelines that you'll need to be aware of and you'll have to use a qualified intermediary to document and perform the exchange.   But so far so good for you.