All Forum Posts by: Lauren Speidel

@Ronald Roetsel - Yes, you absolutely can do a "partial" 1031 exchange. If you do not trade equal or up in value and instead trade down in value the, portion that you don't replace may be subject to tax and depreciation recapture liability. Ultimately, it would depend on the amount of your gain to see if a 1031 exchange financially makes sense. If you'd like, I'd be happy to refer a CPA in New York.

@Michael M. Your tax advisor is correct, the portion of your property that has been used as your primary residence will not qualify for 1031 exchange treatment. Only the portion that has been used as a rental will qualify.

The usual cost for a Qualified Intermediary varies amount companies. On average, I would say the typical cost is around $1,000. It is a permissible selling expense so it will reduce your net sales price and therefore the amount you must replace to have a full tax deferred exchange.

@Kelly Magreevy - You are correct. Your client must close on at least one of the properties he identified during the 45 day identification window. If he does not close on one of those properties, then he has a failed exchange.

@Robin Schuberg If your parents are the ones on title for the relinquished property (property they are selling) it is required that your parents be the ones on title for the replacement property (property they want to purchase). The IRS requires that the same tax paying entity be the one selling and the one buying. Typically, selling in your parent's name and buying in your LLC, under audit, may result in a disqualified exchange.

They could buy the replacement property in their name, hold for 12-14 months and then deed the property to you.

Brian Durst Choosing a 1031 Qualified Intermediary is one of the most important aspects of a 1031 Exchange. I would recommend you interview a few companies and confirm that they have the expertise and experience to assist you. In addition, you should confirm that the company you choose is insured and bonded. I’d be happy to discuss Exeter 1031 Exchange Services if you’re interested. We are nationwide and I believe you’ll see that location isn’t as important as other qualifications.

@Jeff Betschart I will send you a message with their information.

@Jeff Betschart I would be cautious if you plan on doing a cash-out refinance prior to a 1031 exchange. One of the requirements of a 1031 exchange is that you reinvest all of your equity and all of your debt into your replacement property. If you do not follow that requirement you may have a taxable situation. Under audit, the IRS may view your cash-out refinance as you taking cash at closing, which is also a taxable event. Usually if someone needs to pull equity out of a property and a 1031 exchange is involved most will sell their relinquished property, purchase their replacement, and refinance within a few months after closing on replacement.

I'd be happy to provide you with some contacts who can provide financing for your investment property.

@Gulliver R. The more time you have between the cash out refinance and 1031 exchange, the better. The IRS may view the refinance as you trying to cheat the system. If they do view your refinance as such, you will be responsible for tax and/or depreciation recapture on that amount.

As others have mentioned above, some taxpayers sell their property, do a 1031 into another property, wait a few months, and then refinance.

With that being said, if you take funds from somewhere else to place a down payment on your replacement and then at closing take that amount of cash from the sale, it can offset the amount you forked over for the down payment.

Andy NA As mentioned above, your tax liability is going to be the difference between your current cost basis and net sales price. You can choose to pull money out of your sale when completing a 1031. We call that a partial exchange. Be aware that one of the requirements when completing a 100% tax deferred exchange is that you replace all debt and equity from the property you sold and trade equal or up in value. Therefore, if you pull money out you will be responsible for tax and/or depreciation recapture liability. What you do with the funds withdrawn are up to you. They certainly can be used to pay down a mortgage on another investment property but again, whatever amount you don’t reinvest will be taxed. Let me know if you’d like to discuss further.

@Arch D. Choosing a trusted and reliable qualified intermediary is extremely important when completing a 1031 Exchange. I would recommend that you spend time interviewing different QIs and choose the one you feel most comfortable with. I would also recommend that you confirm they are insured and bonded.