All Forum Posts by: Celia Moore

I am drafting a speech and looking for a funny, short real estate joke to catch the audience right at the start. Does anyone have a good Real Estate joke? (audience of commercial brokers) 

Typically to be fully tax deferred, you will need to purchase at an equal or greater amount than the property you sell. The 1031 exchange looks at the gross sales price, less closing costs (Realtor commissions, title & escrow fees, recording fees, etc.). As an example if you sell for $450,000 - 7% closing costs = $418,500, you would need to purchase a replacement property valued at $418,500 and use 100% of the proceeds from the sale toward the replacement property. What causes boot in an exchange is: going down in value, pulling cash out of closing, or paying off unsecured debt out of closing.

The replacement properties would receive carryover basis from the portion of capital gains that were deferred from the relinquished property. If the three replacement properties were all of equal value, that carryover basis would be divided evenly between them. If the total purchase price of the replacement properties is $360K, the new properties’ basis would be calculated like this: $360K - Gains Deferred = New Basis. The basis for each replacement property would be proportionate to the percentage of the total replacement value that property represented, so if they were all equal in purchase price, their basis would all be equal.

Depreciation for the replacement properties can be handled in a couple of ways depending on what is most beneficial for your specific circumstances. Please consult your CPA or tax professional for a complete understanding of the tax implications of any scenario you are considering. Feel free to reach out again if you have additional questions.

Karen, in a 1031 Exchange there must be continuity of vesting between the relinquished property and the replacement property. This means the taxpayer giving up the relinquished property must also receive the replacement property. A single member LLC is considered a disregarded entity for tax purposes by the IRS and can be interchanged with the LLC member's personal name in a 1031 exchange. A multi-member LLC is a separate tax paying entity from the LLC members' personal tax return (unless the two members of the LLC are a married couple AND they reside in a community property state) and therefore if a multi-member LLC holds title to the relinquished property, that LLC must also take title to the replacement property.

The financing implications of purchasing a replacement property in the name of a multi-member LLC should be discussed with your lender. Hope that helps and feel free to reach out again with any additional questions!

Our site is fairly big, holds lots of information. Needs to be more inspiring and modern. Anyone have a good web developer that has room for clients!? 

Hello Laura! Any property held for productive use in a trade or business or for investment CAN be exchanged for like-kind property. Like-kind refers to the nature of the investment rather than the form. Any type of investment property can be exchanged for another type of investment property. A single-family residence can be exchanged for a duplex, raw land for a shopping center, or an office for apartments. Any combination will work. The exchanger has the flexibility to change investment strategies to fulfill their needs.

Any property held for productive use in trade or business or for investment can be exchanged for like-kind property! Any combination works and provides Exchangors great flexibility. We have exchanged Land for commercial property, vacation property for multifamily properties and even single family homes for build-to-suit 30-year lease investments. 

Kevin, a typical syndicated group consists of General Partners and Limited Partners in an entity. The 1031 exchange does not allow for an exchangor to purchase shares of an entity that owns the property. However, you can utilize the 1031 exchange when purchasing into a syndication through the Tenancy-In-Common structure. The TIC structure allows the exchangor to have a separate deeded interest in the property along with the syndicated entity/general partnership.

Hope this helps!

In an exchange whether you have given a seller credit or not, does not affect the value! You would still need to purchase at an equal or greater value than the property you sold. You can deduct traditional closing costs from the gross sales price: Realtor commissions, title and escrow fees, legal fees, recording fees, the exchange fee, property tax, transfer tax and inspection/testing fees. We always recommend talking with a CPA, especially when an exchange is involved.

Jennifer, if you are the only person on title to the property and the only trustee on the trust, the property benefits and burdens will still be reflected on your personal tax returns. There should not be any tax consequences shifting the properties into the trust. We recommend talking with your CPA to verify there is nothing else in this scenario that would trigger tax!