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Avoiding taxes with family transaction
I have recently came across the following situation and was wondering if anyone had an input:
A friend of mine owns a property that is being bought by a gas station chain. It's selling for about 900,000. My friend wants to reinvest this money into a mobile home subdivision for 1.3 million using the 10-31 (his words). However, this property he wants belongs to his father. His CPA said its not possible to avoid the taxes because they are related. the state is Minnesota, not sure if that matters.
1. Is the CPA right?
2. If so, is there another loophole to avoid paying a hefty $200,000?
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- Qualified Intermediary for 1031 Exchanges
- St. Petersburg, FL
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@Richard Boyd, It's fraught with peril. A purchase from a related party will almost surely be scrutinized for a probable basis shifting claim. And many times that basis shifting happens accidentally but still results in the transaction being disallowed. In any event for it to be arms length he would have to purchase from his father triggering a gain on his fathers part unless his father also does his own 1031. And then there would be holding periods after. It's not impossible. But I'd listen hard to that CPA.
- Dave Foster
