@Joel OwensInstead of creating a new thread, I thought I'd continue on one already open for new information.My end goal is to be as passive as possible.

My plan was to unload the property before cap gains rates increase.

I think you are right when you say I want a passive role in real estate.

Originally posted by Steve Babiak:As Steven posted above, your friend should be contacting the QI for instructions on how to proceed so as to not jeopardize the tax-exempt status of the sale of the relinquished property.Just to clarify,1031 exchange only defers capital gain taxes, does not exempt them.

My case is purely passive investment.

However it is gaining popularity heavily overseas, especially in South Africa.

. $30K, new property is $55K...If the selling price of the relinquished property is more than the price of the acquired property, the difference (neglecting transaction expenses) is your taxable gain ("boot" is the term used).

To expand a little more, in an S Corp you can receive income as both earned (paycheck) or passive (stock dividends).

The most efficient way to handle this IMO is to pay have your friend hold a note or if he wants and equity position treat it as if he is holding a mortgage at an agreed rate of interest and you may even want to include him in on a percent of the gain if the property is sold.

If it falls thru, then there's nothing gained, and very little lost.Lynn (FL)