All Forum Posts by: Bill Exeter

Hi @Matthew R., 

Correct.  You can choose.  The one that you have moved out of is now in a three year window before you lose the ability to sell and capture the tax free exclusion, so that is generally the one that investors will choose. 

Hi @Bear Geiger, 

It all boils down to intent.  The taxpayer/investor must have the intent to hold for rental, investment or business use in order to qualify for 1031 Exchange treatment.  Those taxpayers/investors that buy with the intent to build, retrofit, rehab, etc., and then sell are not holding for investment but rather holding for sale as inventory and will not qualify for 1031 Exchange treatment.  

Building, developers, contractors, rehabbers/flippers, condo conversion specialists generally all hold for sale and not for investment (unless they complete the build, rehab, conversion, etc., and then hold for rental, investment or business use rather than holding for sale). 

Hi @Matthew R., 

Any primary residence would qualify as long as you can say as of the date of sale that you have owned and lived in the property for at least 2 out of the last 5 years.  You can only take the 121 Exclusion once every 2 years.  

Hi @Peter J Struck, 

The proposed tax policy changes that would effect 1031 Exchanges never made it into the House Ways and Means Committee mark-up nor the subsequent revisions released. The House voted and approved the current Bill, so no changes were included that would effect 1031 Exchanges.  It now moves to the Senate for action. 

Hello everyone, 

As a follow-up to this post, here are some websites that have been rolled out to help you raise your objection: 

https://www.ipa.com/section138...

https://ritaus.org/save-my-ira...

https://www.handsoffmyira.com/ 

Hi @John Jacobs, 

It is possible, but complicated.  It usually requires that all of the GP and LP partners cooperate together, and in GP/LP syndications that usually is not possible.  

Hi @David Nadelstumph, 

It sounds like you are searching for replacement property solutions for a 1031 Exchange.  

The first thing to know about crowd funding solutions is that many are structured in a way that they would not qualify for 1031 Exchange treatment (e.g.,  membership interests in a limited liability company that are treated as partnership interests).  

The one area that does target 1031 Exchange clients is the Delaware Statutory Trust or DST. Buying a beneficial interest in a DST qualifies as replacement property for a 1031 Exchange. The DST takes care of everything so there is no more property management to worry about.

As David Krulac pointed out, if the sale of your relinquished property has already closed and you already have your net proceeds from the sale it is too late to structure a 1031 Exchange. 

Hi @Keith Thompson, 

You can look at Delaware Statutory Trusts (DSTs). You would have to choose and identify a specific DST before your deadline tomorrow. If you miss the deadline, you could use the Qualified Opportunity Zone Funds as a back-up strategy.

The 1031 Exchange works like an installment sale as Dave mentioned.  You could identify a replacement property and then if you are not able to acquire it you are not permitted access to the funds until the 181st day, which would land next tax year.  Your gain would be taxable in 2022 under Section 453 (installment sale code) or you would elect to take the tax hit in 2021. The technical part for your tax advisor is that Section 1031 of the Internal Revenue Code works in conjunction with Section 453 of the IRC.

Keep in mind that the current version of the House Ways and Means Mark-up includes an increase in capital gain taxes from 20% to 25% depending upon your tax bracket.  

Hi @Michael K Gallagher, 

The House Ways & Means Committee Mark-up was just released last week, so the information is just starting to get out.  

@John Hyre is absolutely right.  "It's time Make Some Noise and not just let it happen."  

These bills can fly right through or they can take forever, but once it is in bill format it is much more difficult to get changes made.  Everyone needs to call their representatives and make their opposition heard.

What we are finding as we speak with members of Congress and their aids is they are not aware of these provisions in the House Ways & Means Committee mark-up. It is critical that everyone reach out to their own local election representatives TODAY to let them know that you are opposed to these changes, that it would devastating to investors (especially those that have already made these investments), and would significantly limit the ability of sponsors to raise funds, etc.  It is imperative that investors not sit back and hope that others fight the fight.  Everyone needs to get involved.