Depends on whether you can prove the home was in fact a rental that you lived there less than 2 weeks in year. If that is that case, and you can prove the home is a rental, yes, you can 1031 exchange it for another property.
1031 Exchange Information I short sold a home and cannot borrow again at the moment. I’m selling another rental I’ve carried for over 6 years and am expecting proceeds from the sale. Lastly, My mom agreed to help me buy another house by carrying the loan. Can I do a 1031 exchange and acquire the new property from her by quit claim deed?
Hmm. There few circumstances where your 1031 Exchange Qualified Intermediary would not give you your money. Remember, during your 1031 Exchange period you MAY NOT have direct access to your funds. The purpose of the 1031 Exchange is to convey your investment from one property to another. You cannot be given the money directly without becoming in Constructive Receipt of your funds. However, if all of Identified Replacement properties have closed, you should have no problem getting any remaining funds (boot) back from your exchange to spend as you please. Just remember any remaining funds from a 1031 Exchange are almost always subject to the Capital Gains Tax.
Actually, 1031 Exchange is not confusing. It’s people that make it confusing. Especially, if the property they are trying to sell doesn’t really qualify for 1031 Exchange treatment. An excellent book is available for free on our web site that can answer all of your questions and give you the peace of mind you need to proceed with your 1031 Exchange. Check out http://www.realtyexchangers.com/1031_Exchange_Information_Center/ProcedureManual.php for more information about 1031 Exchanges.
Yes. Your farm land qualifies for 1031 Exchange and you may purchase an apartment building with the proceeds and receive the tax-saving benefit of a 1031 Exchange. One issue to consider is your farm equipment and your farm house. Some of these items may not qualify for 1031 Exchange because they of of mixed classification. It is a good idea to discuss this with your tax professional (either your CPA or attorney) today!
Great question. The way it works is when you sell your property the funds are stored in Safe Harbor, which is the Qualified Intermediary (Realty Exchangers). You then have 45 days to Identify your replacement properties. If you cannot find any replacement properties after 45 days, you would ask us to return your sales proceeds to you via Federal wire. The IRS will treat your sale just as any other standard sale, which would be subject to Capital Gains tax and possibly the Income tax (please see your CPA). We collect our fees at the time of your sale, so there would be no other fees attached to the transaction.
That’s an EASY one! Just visit http://www.realtyexchangers.com/1031_Exchange/index.html and send us an Email at agents@realtyexchangers.com.
Hi. This is a common question. People want to know after they sold their property if they can still do a 1031 Exchange. The answer…and you’re going to LOVE this…is MAYBE. It’s a big MAYBE because it depends on how soon AFTER the sale are you trying to qualify for 1031 Exchange.
Can I qualify for 1031 Exchange IF:
I sold my property and it was already recorded at the County?
I already transferred the money to my savings account?
The answer is NO. In the case of these questions, it’s either too late or you took control over the money, which means you do not qualify for 1031 Exchange because you were already in constructive receipt of the proceeds.
Can I qualify for 1031 Exchange IF:
I just closed on my sale and haven’t taken the money?
I just closed on my sale and it hasn’t been recorded by the County AND I don’t have the money yet?
YES. Yes, you probably can do a 1031 Exchange. If you find yourself in this situation, call us NOW at 800-570-1031 and talk to a 1031 Pro who knows how to help you convert your sale into a 1031 Exchange today!
If a rental management company enters into a management contract with a property owner that contains an option to purchase the property, can the rental management company later utilize 1031 on a sale of another property using this optioned property to defer gain recognition? What concerns should be made in this option agreement to avoid any issues with this possible future 1031 exchange?
YES there are some specific rules to follow regarding optioned property. Please review the following….
Options to buy or sell real property must be considered in §1031 tax planning. Depending on the classification of the underlying real property, an option may qualify for §1031 treatment.
An option contract may be
a binding agreement by the owner of real estate giving another the right to buy the property at a fixed or determinable price within a specified time, or,
it may be a binding agreement by the owner of property and another giving the owner the right to sell the property to the other person at a fixed or determinable price within a specified time.
A right of first refusal is not an option. Nor is executory contract to sell land in the future.
Gain or loss on the sale or exchange of an option takes on the same character as the underlying property; it is considered gain or loss from the sale or exchange of property. The option contract takes on the same classification as the property (to which it relates) would have if acquired by the optionee buyer.
A taxpayer granted another party an option to purchase property. The property qualified for like-kind treatment in the hands of the taxpayer. The other person exercised the option by transferring like-kind property to the taxpayer. IRS said it was a good like-kind exchange because both the Relinquished Property and Replacement Property were used in the taxpayer’s business. The transaction did not qualify as a like-kind exchange for the other party. The property he transferred to the taxpayer was acquired solely for the purpose of making the exchange and not held for use in a trade or business or held for investment. [viii]
An option is an agreement between a seller (optionor) and a buyer (optionee) to keep open, over a set period of time, an offer to sell property. It’s a unilateral agreement imposing an obligation only on the seller. He must sell if the buyer exercises the option. But the buyer is not obligated to buy the property if he chooses not to.
People use options because they offer advantages to both buyer and seller. They give the buyer time to decide if he really wants to buy the property and arrange financing. They give the seller compensation for taking the property off the market during the option period.
The option must be supported by its own consideration, separate and independent of the purchase price of the property. It creates a contractual right and does not give the buyer any estate in the property. When the buyer acquires an option to buy real estate, he gets the right to buy the property at any time within a specified time period at the price specified in the option. What he pays for the option depends on the circumstances, but it will be small compared with the selling price of the property. If the buyer fails to exercise the option, he loses the amount he paid for it.
Options involve tax consequences for both parties. Two issues are involved: when is tax imposed and is the gain a capital gain or ordinary. Tax may also be incurred if the option is sold or exchanged.
Reminder: Gain or loss from the sale or exchange of an option contract is considered gain or loss from the sale or exchange of property. The option contract takes on the same classification as the property (to which it relates) would have if acquired by the optionee buyer.
Business Property (§1231)—If the underlying property would have been business property in the hands of the optionee, the gain or loss is subject to §1231 treatment. To qualify, the option must have been held for more than one year. Under Section 1231, gain is treated as long-term capital gain. Loss is treated as ordinary loss.
If the holding period of the option is one year or less, gain is treated as ordinary income. Loss is treated as ordinary loss.
Investment Property (§1221)—If the underlying property would have been investment property in the hands of the optionee, capital gain or loss is realized. If the option was “held” for more than one year, the capital loss is long-term. If one year or less, short-term.
Personal Use Property—If the underlying property would have been real estate held for personal use in the hands of the optionee, gain is treated as capital gain. If a loss is suffered, it is personal and not deductible.
Realty Exchangers offers a great opportunity for buyers and sellers of 1031 Exchange property via our Exchanger’s Clearinghouse. For more information, visit http://www.exchangersclearinghouse.com.
