All Forum Posts by: Conner Jackson

@Pete Harper that's definitely a strategy people utilize in similar cases. Most likely, you would need to 1031 exchange into a DST property that will be eligible for a 721 UPREIT a few years down the line. I'll PM you to discuss some more details.

@Chris Mitch If I'm understanding correctly, you sold a property for $950K with $600K in cash proceeds after closing costs and debt payoff. If this is the case - and you want a complete tax deferral - you would want to not only purchase one or more replacement properties that are equal or great in value than the relinquished property, but you would want to use all of your cash proceeds. Any leftover cash proceeds at the end of the exchange is considered cash boot and is taxed. 

In your case, you have purchased replacement property at a higher value, but you've only used up $400K of your $600K in exchange proceeds held at the QI. If you want a complete tax deferral, I'd suggest using more cash for property #2 that hasn't closed yet - especially since you only plan to put $105K toward property #3.

As far as property #3 goes, this would be allowable as long as you make sure you are on the title/deed as a tenants-in-common owner. If the property were to be purchased by the larger entity and you paid for ownership of that entity, it would not qualify for the 1031 exchange since you aren't directly purchasing real estate ownership in that case. 

@Stanley She Unfortunately, your software appears to be correct. It's a common misconception that you only need to reinvest your profit to defer your gains in a 1031. But in order to get a complete tax deferral, you need to purchase replacement property(s) that are valued equal or greater compared to the net sale price of your relinquished property (sale price minus allowable closing costs). You won't begin to defer any capital gains tax until you've reinvested at least your basis ($198,000) from your relinquished property into a new property.

I wish I had better news, but hopefully this is helpful.

Conner