1031 Exchange - Can I buy my wife's rental unit?

[Matthew Lockwood]

Here's the scenario:

1) I bought a house 17 years ago in Tx for 45K.  Paid off the note.  Just sold for 90K. 45k capital gains.

2) My wife owes 45k on a house she bought years ago with her ex. He quitclaimed the house to her years ago, before I met her.  She still has the note with their names on it.  He (rightfully so) is demanding that she get his name off the mortgage, as she was supposed to have done years ago.

Can I buy the house from my wife for the 45K, thereby satisfying the 1031 exchange and obviously paying off her house?

My name is not on the title, and I believe since we didnt buy it together, community property rules dont apply.

[Ted Lanzaro]

One, there are related party rules on exchanges.

Two, a 45k purchase does not satisfy the exchange purchase price criteria for a full exchange. You need to buy a 90k property.

Three, your wife's house would also have to be income producing. It cannot be your personal residence.

Plus, you would have had to set up the exchange when you sold the first property and the funds would currently be held by an intermediary.

Hope that helps,

Ted