1031 Exchange With Relative

[Raymond Lawton]

I am currently in a situation where I am trying to help a seller who accepted my offer with a 1031 Exchange. Unfortunately he was informed that because the property he wants to exchange is owned by his in-laws he will be unable to execute the 1031 exchange. From what I have read there seems there might be some ways around this such as maybe changing the percentage of ownership in the property so they aren’t considered a relative. Any advice is greatly appreciated!

[Bill Exeter]

Hi @Raymond Lawton, 

Dave's last suggestion would have risk.  The IRS could take the position that the acquisition of the property by you was merely a "step" in order to get around the related party rules.  A sharp auditor would likely classify it as a step transaction and then disqualify the 1031 Exchange.