All Forum Posts by: Account Closed

I don't have any recommendations for your area, but note that 1031 qualified intermediaries usually work with customers remotely, so geography need not be part of your selection. There are a number of good QIs who post on here, title insurers and banks often offer the service, and of course a Google search will reveal options.

You can choose a facilitator anywhere--they almost always work with customers and their advisers (broker/closing lawyer/CPA) remotely. There are several facilitators who post on BiggerPockets, Google lists a number, and your title insurer or bank may provide the service. It's always good to hire a CPA to manage that 1031 exchange/facilitator process. The price should be modest, but a CPA who understands 1031 exchanges can watch out for you and make sure the process is done properly.

As a follow-up, I'd caveat that from your post the specific family connection to your sister-in-law (say, is she your husband's sister?) could add an additional wrinkle to her ability to do a 1031 exchange because of the related-party rules in the regulations for exchanges. That'd be something else her, or your LLC's, lawyer or CPA would need to look into.

In the transaction you're describing--she sells her membership units to the other LLC members--she would not be able to use that money for a 1031 exchange. Equity in a business entity is not of like kind with interest in real property. I think her motivation to do an exchange might be one of the reasons she's seeking this documentation. There are steps that closely held partnerships/LLCs can follow to make her share of the property 1031 exchange-eligible, e.g., she trades her membership interest in the LLCs for the equivalent fee simple ownership in the underlying properties and then immediately sells that fee simple interest to you for cash. Transactions like this don't add significant cost or paperwork, but you would need to be sure to use an attorney and a CPA to structure and paper it correctly. She would need a professional to figure out how her basis or recaptured depreciation would be affected, as well. Hope this helps.

I'd think about this in terms of steps. This is a very basic example: Step 1: You sell your investment property, say, a rental house for $500k. The proceeds go directly to a third-party qualified intermediary (I'll call that a QI). The link you posted is a QI service. Step 2: You have 45 calendar days to give your QI a list of properties you *might* use the proceeds from step 1 to buy. Once 45 days pass, you're locked into this list. Step 3: You have 180 days from step 1 to close on buying one (or sometimes more) of those potential replacement properties from step 2. Say, a rental duplex for $800k. Your QI wires $500k to the seller, and you pay the remaining $300k through cash or a loan. It's important to have an adviser working for you in this process, because you can probably already see that it gets a lot more technical than this simple example. The adviser is usually best to be a CPA, but might also be your broker or real-estate lawyer. You shouldn't rely on your QI for tax advice though--they should be able to answer basic questions about the 1031 process, but a CPA who's familiar with your goals and circumstances is the best person to guide you through the process. Hope this helps.

It's a good rule of thumb that you can't mix the benefits of a 1031 exchange with your own personal residence. As for the transactions you describe, a secondary rule of thumb is if you're considering a workaround, would you really want to be in a position of defending to an IRS agent why you engaged in that particular transaction.

Qualified intermediaries typically don't physically meet with customers, but if they prefer a face-to-face meeting it's worth asking their bank if it provides QI service. A good number of banks will provide the service if asked, although it's not something they advertise. If a title insurer is involved, they may also provide QI service and have a local physical presence.

David, so long as you set up your 1031 exchange prior to selling the relinquished property and you use the entire 39k toward the new property (minus certain closing costs), then the entire 39k should be tax deferred. It's always worth hiring a CPA to confirm you're getting the tax treatment you're aiming for based on all of your specific facts. If you shop around, the fee for that kind of accounting advice should be fairly modest.

Asad, I guess the preliminary first question is the same, did he already set up the 1031 exchange with a qualified intermediary *before* closing the sale?

Michael Biggs that's the concern I was getting at, that he's already relinquished the property without setting up the exchange first.