All Forum Posts by: Ryan Thomas

@Eshan Tarneja I’m an agent in Jax and would love to help, just moved down here from NY a few months ago.

@Carlos Gonzalez Yeah, no problem with that. As long as the combined value of the two purchases is greater than the one you sold and as long as you reinvest all the cash from the one you sold, you’ll defer all the cap gains.

@Andrew Aladjadjian yes, absolutely. It would not matter where the other TIC owners funds came from. The taxpayer doing the exchange would just need to follow the reinvestment rules for the purchase of their particular TIC interest.

@Andrew Aladjadjian Primary residences don’t qualify for 1031s, only property used in a trade or business of held as an investment would qualify.

If they lived there 2 out of last 5 years then they could take the 121 exclusion, which excludes $250k of Cain if single or $500k of gain if married and files jointly.

@Andrew Aladjadjian yes, they could buy the replacement property together as tenants-in-common (not as a partnership).

Hi Gary,

These types of exchanges are fairly common and can be completed as long as you have planned well ahead of time.

Check out the info on this link for some background:

https://apiexchange.com/improvement-exchanges-build-or-improve/

Most larger QI's can handle these types of transactions with relative ease. Be sure you work with a QI who has experience with improvement exchanges.

@Shawn Ackerman - The identification period is only 45 days from the date the relinquished property is sold. You are correct that the entire exchange is 180 days.

An important thing to remember is that the underlying tax owner on the relinquished property needs to remain the underlying tax owner on the replacement property.

Chris,

In NYC, the seller's attorney would typically prepare the contract.

Umesh,

The only time husband and wife can exchange property held in their individual names and acquire property in an LLC is if they live in a community property state, and unfortunately , NC is not a community property state.

Since you and your wife are the underlying taxpayers, you need to remain the underlying taxpayers on the replacement property, so buying in a MM LLC (partnership for tax purposes) does not work.

Here is a solution:

See if your lender will allow you to take title using two (2) LLCs. If so, create a single member LLC for you and a single member LLC for your wife. Make sure the LLC's are both "disregarded entities" for tax purposes. You can then buy the property as tenants-in-common using the two (2) LLCs.

The reason this works is the underlying taxpayers from the sale are remaining the same on the purchase.

Hope this helps!

@Brianne H. Yes, a Canadian can do a 1031 exchange in the US (US property for US property).

You will run into an issue with FIRPTA (Foreign Investment in Real Property Tax Act).

When a "foreign person" disposes of property in the US, the buyer is required to withhold and remit to the IRS 15% of the gross sales price for individuals (35%-39.6% for foreign entities) in order to ensure that any taxable gain realized by the seller is actually paid.

This is a big problem when trying to do a 1031 exchange, because when performing an exchange, the exchanger must acquire property (or properties) greater in value AND reinvest ALL of the proceeds from the sale, in order to defer all of the capital gains taxes. If the buyer has to send 15% of the gross sales price to the IRS, then the exchanger won't reinvest all of the proceeds, then the exchange likely wouldn't be worthwhile.

There are a few ways for the exchanger to be exempt from withholding.

1. The sale price of the property is less than $300k, it will be the buyer's primary residence and the buyer will sign an affidavit to this effect.

2. You perform a simultaneous same day closing with no "boot". Basically, you close on the sale and the purchase in the same day (sale first) and you satisfy the requirements for full tax deferral (listed above).

3. Procure a Withholding Certificate from the IRS. You can then bring this to closing an the buyer would not need to do the withholding. It can take up to 90 days for the IRS to issue this certificate, you you would need to apply well in advance of closing.

I hope this helps!