"Learned" something odd about 1031 exchanges

[Kyle Shankin]

I'm hoping someone who's done a 1031 exchange before, or a CPA, can swoop in and drop some knowledge on me. I was over at my CPA's getting my taxes done and talking strategy for this year when the idea of a 1031 exchange came up. My CPA surprised me by saying that 1031 exchange is extremely difficult to pull off, not because of things like qualified intermediaries or the super strict rules about declaring the properties that you're looking at purchasing, or the timeline in which you must purchase said property, but because you have to trade properties in the exchange. Is this correct?

I tried looking this up, but for the couple of hours that I've spent actually looking online, and combing through the books that I've read that mention 1031 exchange, I can't find anything that actually disproves what my CPA has told me. All of the other rules of the exchange are laid out, but the fact that you're meant to swap properties with another individual is never explicitly mentioned.

[Dave Foster]

@Kyle Shankin  your CPA is either over 60 or he's been reading books that old.  Until the settlement of the Starker case there was a whole cottage industry for people exchange properties simultaneously.  To this day it is possible to actually trade properties with someone and by doing that complete a 1031 exchange.

But since 1996ish the process is that you sell your old property with the transaction being documented and overseen by the QI.  The time periods apply and they go and buy different replacement investment property.It's not difficult.  From your perspective it's actually no different than what you would normally do - sell then buy.  Its just the added QI requirement and the timelines.

In the old days - yep it got a little crazy.  @Jay Hinrichs is maybe the only person of my vintage who remembers these (and he's much younger than I).  There would be daisy chains of people swapping with someone to get a property that someone else wanted just because a totally different person would take that property and they had the property that the person who owned the property you really wanted really wanted.  So everyone would sit around a table almost and swap at once.  Then some realtor would get screwed out of his commission.  A fight would break out over valuations so some dry west Texas acreage would be thrown in to balance the deal.

Yeah it was tough back then - Now??? Easy peasy.  Wanna do a 1031 exchange - contact a QI sell a property, buy a property.