All Forum Posts by: Eric Dacierno

Thanks for the info Dave!!

@Dave Foster

Another special 1031 question... My mom and uncle own an apartment building they inherited in the 1980's. My uncle is tired of managing it and wants to sell/cash out (pay capital gains). My mom wants to 1031 her half into more rentals. There is a substantial gain ($7,650,000) based on an offer they received recently. The property is owned by an S-Corp with my mom and uncle 50/50 owners. I understand its almost impossible for the partial 1031 exchange to occur now because of the S-Corp. What entity should they change the S-Corp into (LLC?) that would allow this partial 1031 exchange to happen in the future? My uncle is ok with waiting a few years (as required by the IRS and the lookback). I am trying to contact an attorney but you are very knowledgeable in this area and thought I'd ask you first...the property is in New York.

Also, I believe I spoke with you years ago about this but my memory is fading and health issues in my family delayed everything with the sale of this property.

Thanks- Eric

@KatieBalabat

My family has a situation regarding real estate owned by 2 partners and was wondering if you could help me out? 

My mom and Uncle inherited a property in the 80's (motel turned into apartments). At that time they created an S-Corp with my mom and uncle each 50% owners. They received an offer for the property which would create a sizable capital gain ($2 million each) if they sold now. My uncle wants out of being a landlord and is ok with paying the taxes. My mom would like to do a 1031 exchange for her portion but after researching, it is very hard to do as the S-Corp must do the exchange. Is there a way to transfer the property out of the S-Corp and into another entity (LLC, tenants in common...) so if they sell in the future my uncle can cash out and my mom can 1031 exchange her part to save the 40% or so in capital gains taxes? I researched and the look back period is generally 2 years to satisfy the IRS and my uncle is ok with waiting. The property is in New York where my uncle lives. My mom lives in southern California.

Thanks in advance.

Eric

Thanks for the feedback, you've all been very helpful. 

Eric

My mother owns 50% of a rental property with her brother (my uncle). They inherited the property in the 1980’s. At that time they formed an S-Corp to hold the property where they are 50%-50% shareholders.

They received an offer of $6.6 million for the property. They have a very small loan (<100k) on it. Based on the value when they inherited it 30 years ago and now, if they sell they will be hit with a very large capital gains tax bill (approx.. $1 million each). My uncle wants to cash out and pay the taxes. My mom wants to 1031 exchange her half into like/kind rental property. Based on my research this can’t be done, it is either both partners in the S-Corp or none.

My mom and uncle are willing to stop the current sale. They want to form a new entity to hold the property in which it will allow for a future sale of the property where my mom can 1031 exchange her portion and my uncle can cash out.

Is this possible? If so, what entity should they put the property into? Is there a time period they should wait before trying to sell the property in the future to avoid any look-back period for the I.R.S.? 

Any help would be greatly appreciated, Thanks...