All Forum Posts by: Carl Shorett

@Carl Shorett, That's actually a brilliant strategy. They will be able to take advantage of both the 121 and 1031. Plus they'll have cash flow for two years as well.

And if you really wanted to get fancy you could give them some releasable earnest money (from the tax free portion) so they can go buy their next house now.

Great offer for them.

Only hesitation is would the IRS consider this structure an installment sale due to the discounted purchase option, thereby failing to uphold the Seller's burden to "hold the property for investment". Any 1031 tax lawyers lurking in the wings?

I wouldn't want to rent with a FMV purchase option as I'd like to lock a discounted price today in exchange for agreeing to rent for as long as needed for the Seller to qualify the property as an investment.

0 Votes

Seattle, Washington

I am looking to purchase a house from someone who has owned the property for 20+ years. Their cost basis is ~$250K and the home is now worth ~$2.5MM. This is their primary residence so they qualify for the $250K Section 121 exemption. I would like to structure a deal with them where I rent the home from them for two years, allowing them to qualify for a 1031 exchange to defer the capital gains taxes on the ~$2MM gain. I would rent the home at a market rate, but would structure a discounted purchase option at the end of the two year rental. Is this allowed for purposes of the homeowner's 1031 exchange?

0 Votes

Seattle, Washington

All Forum Posts by: Carl Shorett

Carl Shorett has started 1 posts and replied 2 times.

Post: Primary Residence 121 + 1031

Post: Primary Residence 121 + 1031