Long term capital gain avoidance without 1031?

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Hi Account Closed, I am jumping in here to expand on the comments above regarding acquiring property via a foreclosure action. Replacement properties can be acquired through auctions, trustee sales (foreclosure actions), etc., but can be more complicated in structuring (and most costly). The Qualified Intermediary must "acquire" the replacement property and then convey the replacement property to you in order to properly integrate the property into your 1031 Exchange. This is generally done through a very basic Assignment of the Purchase and Sale Agreement from you to the Qualified Intermediary. The challenge in foreclosure actions and some auction houses is that there are no contracts involved. The winning bidder (you) simply receives legal title to the property, which also means that it has not been properly integrated into the 1031 Exchange transaction and will not qualify for tax-deferred exchange treatment. The process of the trustee's sale or auction house will determine the additional steps necessary to properly structure the purchase of your replacement property through your 1031 Exchange transaction. The legal title often must be acquired and held by the Qualified Intermediary since there is no legal contract to Assign to the QI and then the legal title is transferred to you. It just depends on the circumstances, but is generally more complicated than what you would expect if done properly.

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Account Closed, Well, your post says without a 1031 but that is the easiest way to accomplish exactly what your are trying to do. Maybe the key lies in the fact that you do not have to 1031 the entire amount. You mention that this inherited land is held as tenants in common. Since that is the case, each of the tenants can make their own decision on whether to take cash and accept tax liability for their % of the sale, or to do their own exchange with their % or to combine with each other.The problem is if you already own that second property and are wanting to pay down debt. That won't work. You also will not be accomplishing anything if you don't intend to hold that second property for a while.If there is no debt on the property now then you could take those proceeds and using a 1031, buy a cash flow property of some type that is also attractive to borrow against. Then immediately after purchasing it and concluding the exchange you could put financing on it and take the cash to use for the flip you describe. By doing it that way you save the tax bill, accomplish your flip, and the cash flow from the new property pays the debt service on the cash you want to use.

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Account Closed, I may have more good news for you - or some really bad news.First the potential bad news - If you have already sold the property you cannot do an exchange. The exchange must be documented at the closing, a qualified intermediary in place, and you cannot touch the proceeds. So if you've already closed then it's dead.But, the potential good news. If your exchange is in place at your closing then you have 45 days from that date of closing just to identify your potential replacement property. You don't have to be under contract but after day 45 the list cannot be changed and you must close on one or more of the properties on the list. So we usually recommend that you get the new property under contract within the 45 days if possible (or even before you sell since the dates of contract don't matter, only that you close your sale before the purchase).Then, from day 45 you have an additional 135 days to complete your closing (180 days total from the closing of your sale). This should give you ample time to line up financing on a property you have under contract.Buying a foreclosure is absolutely an option depending on the logistics of getting the money moved quickly enough from your escrow acct to the govt. entity handling the foreclosure sale. Sounds like you may have some things to think about. PM and I'll be happy to chat.

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Brilliant Dave! Thanks! Now I only have about 45 days to find a property, and get it financed. Does anyone have any suggestions for a lender that can get this kind of thing done? I have stellar credit but low earned income.Also, Is buying a forclosure and option?-c