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Like Kind Exchange - Location, Part 3
Marilee Hill, MA Hill Brokers
Like Kind Exchange - Location
The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.
New technology is creating lots of rapid change in how business works today. However, in some ways, our world still looks like the same as it did decades ago.
For instance, if you bought a property 15 years ago in Washington state, that property is no doubt still at the same location. You, however, may be moving to another state for retirement or have a family member who's interested in managing a property. As long as there's straightforward ownership criteria and like kind eligibility, there shouldn't be any problem with a 1031 exchange for these strategies.
Hi, I own an investment property in Australia that I am looking to sell. I am a US Resident (Green Card) and want to buy another property in Australia with the sale proceeds and avoid CGT under 1031. Do you deal with foreign 1031 exchange transactions, specifically in Australia?
Yes, a 1031 exchange has to be made from one foreign property to another foreign property, or from one domestic property to another domestic property. I don't handle foreign 1031s so ask around for qualified intermediaries near you.
I have a 1031 property in the UK..intend to sell and buy another 1031 in the UK and rent it out for two years and then swap our primary residence in U. S. Virgin Islands for the one in the UK….we are worried about the 45 day rule to identify the propertie(s) you want....what happens if the seller backs out?
While you cannot exchange a primary residence outright, you can sell it under section 121. Each person on the deed can get a $250,000 exclusion from taxes. Suppose you change your primary residence to the United Kingdom: in this case you cannot swap or exchange a U.S. Virgin Islands residence for that property.
U.S. Virgin Islands tracks to the United States in terms of domestic 1031 exchanges.
I have a house in India which I want to sell. Can I get the benefit buying a primary home in U. S. Virgin Islands with the provision of 1031 exchange program and defer the capital gains on that.
Again we need to respect the like kind requirement. You will need to exchange a country outside of the U.S. or its holdings with another property in a country foreign to the U.S.
About Marilee:
Role of Marilee Hill, Registered Representative (RR)
With extensive experience in real estate and specific knowledge of 1031 exchanges, Marilee Hill has helped many clients to understand the risks and the rewards that go along with this kind of deal.
She's been a property manager and a real estate broker, and Hill understands FINRA and assorted rules and regulations.
She enjoys helping clients to navigate a complex terrain when it comes to strategizing and setting up a 1031 exchange and looking for a qualified intermediary to help.
Ask Marilee Hill about your next 1031 exchange plan.
Like Kind Exchange - Asset Class, Part 3
Like Kind Exchange - Asset Class
Many people who are hearing about a 1031 exchange for the first time wonder about what “like kind property” means. It generally refers to two different properties that are a similar type of property. But it sometimes gets pretty complicated.
For instance, before a revenue ruling in 1991, a particular client paid a real estate attorney over $100,000 in research costs and representation to declare a particular property “like kind”. After the IRS 1992 ruling defining “like kind” as exchange of real property held for productive use in a trade or business or for investment. After that broad definition, the revenue ruling meant that clients no longer pay those legal fees for determining like kind. Most CPAs are now knowledgeable.
Anyway, like kind is critically important to a 1031 exchange deal.
Can I use the money of sale of rental property to pay loan on other rental property and use 1031 exchange?\nCan I use the money from stock sale to exchange to real estate?
Unfortunately, you cannot use exchange funds to pay down the loan on a property. You also can't use money from the sale of stocks for real estate. A deed and a lien on the property do not represent like kind, and neither do equities and real estate funds.
After selling a vacant lot, can we buy a condo or single residential home?
Since both the vacant lot and the condo or single-family home are ‘real property,’ YES you can.
Will the following 1031 exchange be judged as "Like Kind"? Day Care business (w/bldg and property valued for $2,000,000). For a home remodeling business (w/ a bldg and property valued at $1,300,000).
In your example, the building and property both qualify for like kind – your boot will be $700,000, and you pay taxes on that – you may also need a separate business contract for the day care operational items.
Marilee Hill has 20 years of experience in real estate, and is a FINRA licensed professional who knows the 1031 exchange field well. Since dealing with her own multi-million dollar properties and helping clients to look at risk management with these kinds of deals, Hill has done a lot of work in this area, and understands the process and how it affects various stakeholders. Get help from a professional who understands the 1031 exchange system.
Failed Exchanges, Part 2
Failed Exchanges
Want to succeed in a 1031 exchange? Planning and research are key.
There are number of core rules to completing a successful 1031 exchange. Avoiding failure means getting the required ID’s and qualified intermediary paperwork for settlement. It also means using the right timeframe and complying with eligibility requirements.
In addition, those who are contemplating a 1031 exchange have to understand ‘like kind,’ a criterion for eligible properties. They have to understand what the qualified intermediary does and why that's important. They need the right legal and tax advice to do the exchange the right way. All of this is a good foundation for completing a 1031 exchange in full accordance with legal requirements.
2 days ago I closed on the sale of rental property thinking I had 180 days to do a 1031 deferred exchange. I didn't realize that I needed an exchange intermediary to facilitate the disposition of relinquished property and acquisition of replacement property. Am I too late to do an exchange?
Unfortunately, that type of exchange is not possible – it's best to plan ahead.
I sold a Malibu land 3 mths ago and sold a house 1 mth ago. How long do I have to file 1031 exchange & buying other house to defer tax on my capital gain?
In hindsight, without qualified intermediary paperwork at settlement, a 1031 exchange is not possible. We always talk about bringing a QI to the table because then you would have 45 days to identify properties.
When you need trusted real estate advice, talk to Marilee Hill. Her experience managing properties and practicing real estate in various jurisdictions has helped her to build a reputation as a knowledgeable professional with expertise in various kinds of real estate deals including 1031 and like kind exchanges.
There's a lot to learn in a 1031 exchange or related deal. But real estate is also about people. Marilee Hill knows how to deal with sponsors and all stakeholders in an exchange deal to make everything run smoothly.
Talk to her about your plan to see if it is viable.
Exiting the 1031 Exchange Chain, Part 2
Exiting the 1031 Exchange Chain
1031Ex.com, April 2019 – 1 The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.
There's a strategy I called the retirement exit, and it makes sense for someone who's patient and likes to plan for the long-term. It requires some self-discipline, but if you like deferred gratification and benefiting from long-term financial strategy, it might be right for you.
This strategy involves creating a long-term plan to leave your property for financial gain. Maybe you've been there a long time and started to notice things that you don't really like about where you live – climate, economics or anything else. Want to set sail for sunnier vistas?
With this 1031 exchange strategy, you can move money in real estate transactions without the traditional tax burden associated with selling. Here's how it works – first, you acquire an investment property in addition to your permanent residence. After two years renting out the property, you can move into the investment property and claim it as your new primary residence.
This leads to substantial exclusion gains for property owners.
If done correctly, it's absolutely legal and is a great way to protect your financial resources.
We bought a rental from the money selling a vineyard using 1031. Is there a certain\n\namount of time before we can sell the house and not have to invest? We are in our 80\nand could use the money in the future.
A sale requires an exchange to lighten the tax burden – that's the basic bottom line. So if you want to do another swap, you can, if you wait, but if you don't, you have to pay all the taxes.
Role of Marilee Hill, Registered Representative (RR) Where do you turn for dedicated 1031 exchange advice? Marilee Hill has the experience and knowledge to help. Marilee Hill has practiced real estate in in multiple states and managed properties extensively – for instance, setting up a $12 million apartment property in 1991.
Since then, Marilee Hill has been helping clients to lay the groundwork for 1031 exchanges in a straightforward way. She knows the rules of the road and the rules of the game, but also understands that real estate is a people process, and that a good agent or professional benefits from a friendly and sophisticated approach. Ask Marilee Hill about real estate strategies for 1031 exchanges that will help you stay within the bounds of the law and accomplish your goals the right way.
Exchanging Multiple Properties, Part 2
Exchanging Multiple Properties
Exchangers can bundle properties into one lot, observing the closing date of the first property closed as the beginning of an ID period.
However, other rules apply – how the properties are titled, what the timeline is plus the debt to cash ratio all need to be understood before a sale. In selling a property and buying multiple properties, or selling multiple properties to buy one property exchangers have to be able to consolidate the timeline, add up and maintain the debt to cash ratios and make certain all the entities together can do an exchange.
Marilee.Party A sells prop.1 to Party B for $2.4M. Party A also sells another prop. for $1.5M net. Party B owns prop. X worth $4.8M with $2.4M assumable debt. Can Party A exchange those 2 properties for prop.X -Pay down $1.5M towards the $2.4M plus cash to pay debt entire debt and qualify? Thank you
I think I understand the math - If the two sales by Party A ($3.9M) are all cash, then YES, Party A can purchase the property X worth $4.8M, use her cash to pay down the debt to $900,000 and qualify. The rules are: you cannot take any cash out of settlement. You can substitute cash for debt. You can add debt to your exchange. You need to buy equal or greater ($4.8M is greater than $3.9M). This qualifies every day.
Hi! I have a couple questions. I have 2 single family rentals in Denver Colorado. 1) Can I exchange the TWO of them TOGETHER for ONE rental in California (since property there is so much more expensive). 2) can the rental in California be a condo or must it also be a single family residence? Susan
Yes, you can exchange two properties for one, as long as you stay within the 1031 exchange guidelines regarding 45 day identification and 180 day settlement. The rental in California can be any kind of real property such as a Condo.
With a wealth of experience in real estate and 1031 exchanges, Marilee helps people to deal with a complex real estate process. Her long experience with her own properties and having real estate broker licenses in three jurisdictions help.
Marilee likes helping clients to understand the ins and outs of a real estate deal. With her combined more than 20 years as a commercial real estate Broker plus another 20 years with FINRA licenses Marilee has the experience to help clients to plan adequately for a real estate future. Let Marilee help you with a real estate portfolio that needs a guiding strategy in terms of tax regulations and more.
Exchanges with Partnerships, LLC’s and other Entities, Part 2
Exchanges with Partnerships, LLCs and other Structures
When partnerships, LLCs and other entities get together to do 1031 exchanges, entity exchange rules apply. These rules also tend to change over time. One example is the “drop and swap” – a process where one party in a partnership or LLC buys out another. The greedy state of California no longer permits, yet on the East Coast drop and swaps are a daily occurrence.
For those in a partnership or multiple party LLC the entity can distribute proportionately the assets to individual newly created entities and after a two-year period each upon a sale can go his separate way and avoid large capital gains taxes.
Changes in permitted entities into which one could exchange evolved from 1994 to 2002 when the IRS modified and provided clear guidance for the then common TIC structure. When the 2008 financial debacle revealed the TIC structural problems, the DST (2003 birth) with few exceptions replaced the TIC.
Neither individuals, Partnerships or LLCs or other entities can exchange properties into funds or real estate investment trusts.
If I sell a commercial property can I exchange into a REIT ?
Regardless of the kind of real property, you can never exchange into a REIT.
I am a partner in a Apt. complex that we are preparing to sell and when it is sold I will realize about a 250K capital gain. I have been in the partnership for over 25 years. Can I take the gain and invest it in a REIT and use the 1031 tax free exchange?
1. To do an exchange, you must exchange the original investment amount, the capital gain amount
and any debt.
2. You as an individual partner cannot exchange from an LLC or Partnership structure.
3. The REIT is not a vehicle into which anyone can do a 1031 exchange
About Marilee: Role of Marilee Hill, Registered Representative (RR)
With unique prior experience Marilee Hill with more than 20 years as a broker in the field of commercial real estate obtained FINRA licenses to specialize in securitized 1031 exchanges. Her first 1031 exchange 1991 was a $12M apartment acquisition before the existence of the TIC.
Marilee presents 1031 exchanges a in a straightforward way and helps clients to understand risk tolerance and financial requirements.
Laying the groundwork for 1031 exchanges means understanding people and how they work and explaining how every step of the process unfolds.
Ask Marilee about help to form a real estate strategy that will keep your plan legal and in the good favor of regulators.
Title Requirements and Changes, Part 2
Title Requirements and Changes
One of the requirements for a 1031 exchange is that the title on the sale property has to match the title on the purchase property. Otherwise, the execution of this strategy can be perceived as “gaming the system” to defraud the IRS. Then there are the footnotes — Husbands and wives have different requirements and title need not always be the same!
Dealing with family members is another sub section. Want to add a child? —Two years must pass afterwards before you then sell the property in an exchange. Want to sell to a family member? Family member needs to keep property for two years. And only one of you can do an exchange. However, marriage is a different scenario you can place your new spouse on the deed at the court house.
Helping people with their exchanges is never boring because there are always new wrinkles in the world of 1031 exchanges for a very basic reason — People and their circumstances keep changing.
What is the best strategy for a 1031 exchange property? Will adding by daughter to the title cause tax penalties? Or should I leave it as is?
You must leave the title as it is; you cannot change the title near the time of sale. Two years ahead of sale would be safe, and then there is the “gift” tax to consider.
Marilee Hill brings a lot to the table in terms of real estate experience. As a broker and a property manager, Hill has learned the “rules of the road” and how to advise clients on various aspects of a real estate deal such as a 1031 exchange.
One thing that stands out in working with Marilee Hill is that she very much believes in making each deal a “people-centered deal” – she understands the value of navigating through a process with a variety of stakeholders, in close communication and in acknowledgement of everyone’s needs.
Let Marilee Hill help you with a plan to leverage a 1031 exchange opportunity.
Exchange Basics
Partial Exchanges and Boot
Reasons for a 1031 Exchange
Related Persons Exchanges/Self-Dealing Exchanges and Mortgages
The Role of the Qualified Intermediary (QI)/Registered Representative
Turning a 1031 Exchange into a Private Residence
Turning a Personal Residence into a 1031 Exchange
Resources Information International
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