All Forum Posts by: Michael Skoczylas

There is a lot of complicated issues here. Under IRC 1041 any transfer between spouses will not generate any gain or loss. The basis transfers, and no gain or loss will be recognized. I believe most states will exempt this from transfer tax because the transfer is between Husband and Wife, but that is something to look into as well. But on the Federal Tax side, no gain or loss will be recognized or realized. 

No issue from a federal tax perspective. But if you want to 1031 out of your CA property- then there will be a clawback ;)

The longest I have seen practitioner's suggest is 18 months. So even by the most conservative estimate you should be fine! 

No Problem Mark - Happy to help. 

1. In a 1031 in order to avoid any taxable "boot" your father will have to use all the proceeds- he could use that $20k on another investment property though. 

2. A TIC can be done in any amount. A transfer can happen later on down the road. But his intent must be to hold for investment purposes for the time being.

3. With a 1031 - after the sale of the apartment - your dad has 45 days to identify a property and 180 days to close. 

However, the 1031 MUST be arranged prior to closing on the sale of the apartment.

@Mark Creason I still think that puts him below the 3.8% Medicare Surcharge threshold. But either way- I agree with @Dave Foster the math certainly makes sense if he does have a new investment in mind. I would much rather pay myself (with cash flow and future appreciation on that $18k) than pay the IRS. Just my 2 cents.  

If he sells the apartment and enters into a 1031 - he can purchase a tenant in common (TIC) interest in the house with you- as long as he rents his interest to you in an arms length lease. The first hurdle for a 1031 is that it must be for trade or business or investment purposes. If he is just buying you a home, that would not qualify. If he buys lets say 50% of the home, and rents you the other 50% that should work as a good 1031.

If he transferred you the property (ignoring any gift tax ramifications here) you would not be able to 1031 it into your own home, nor would you likely have the requisite holding for investment on the front end. 

I think if 1031 is really your desire here, then having you and your father buy TIC interests and having a true arms length lease with him. This may be the best way to do it for gift tax purposes as well.

@Marvin Meng

• Can any of the proceeds from a sale be applied toward rehab costs of the new property and still fall under the 1031 protection? Yes - you can do a construction exchange/improvement exchange/build to suit exchange (lots of names for one strategy). It is slightly more costly, but a very effective tool if used properly. I assume you are rehabbing it to rent out and not to flip though. Flip's are not eligible for 1031's. 
• If not, can a property purchased under a 1031 be refied, and if so can money be cashed out? This is a source of much controversy in the 1031 world. For the most part the 1031 needs to be complete before a cash out refi - and practitioners have varying opinions regarding a cash out- some of them suggest up to 18 months. 
• Are there time limits on when a 1031 purchased property can be refied?- see above. 

@Hailey Brown it should only be a filling fee with the County- which varies based on location. It should not be an expensive process at all. 

@Hailey Brown I think you need to look back at the reporting and ownership first. Your attorney and accountant likely have a better picture of this. This can be solved, you just need to figure out what the actual issue is first. Start with where you were- and then you can get to where you want to go. 

@Max Zappas every situation is different. You can 1031 into a new more expensive property and any additional money put into the property (other than 1031 proceeds which receive a carryover) . But your theory is correct if you do trade up in value. To get the depreciation quickly though I recommend a Cost Segregation study - speak to @Yonah Weiss about the benefits of Cost Seg. But one of the many advantages of real estate is the combination of cost segregation/depreciation and using 1031 to avoid capital gains/recapture. Good luck!