Title Requirements and Changes, Part 2

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.

Title Requirements and Changes, Part 2

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.

Question 1:
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?

Answer:
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.

About Marilee: Role of Marilee Hill, Registered Representative (RR)

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.

Title Requirements and Changes



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.

Title Requirements and Changes

Here’s the underlying guideline for this discussion: investors cannot swap their basis to their own advantage, which can be seen as defrauding the IRS.

The hard rule is that the title on the sale property must read the same way as the title on the purchased property. If you’re working with family members, there are rules in place for that as well.

Why do you have to hold a property for two years when dealing with a relative? It’s so that the IRS establishes “intent.” The rule prevents an investor from using a quick series of swaps to shift an undesirable basis.

This works in specific ways according to your family situation. For instance - so you got married! That can be a great thing, because the IRS does not think that in your decision to marry your intent was to shift a tax basis – in other words, it regards it as a legitimate life change. So you can add your new spouse to the title anytime!

On the other hand, many investors see this and they think they can add a daughter or son - forget it! If you are planning your estate and have decided to have a Revocable Living Trust with your Social Security number attached to it, not a newly requested EIN, then you can change the title to your Trust. Otherwise, you’re out of luck.

Question 1:
My name is on a deed from a 1031 with my name before I was married now married can i change the name to my married name

Answer:
Good news…YES! The IRS will acknowledge this change.

Question 2:
Marilee,\nWe are participating in a 1031 exchange from VA- Texas.\nMy question is this... To honor the 1031 exchange rules, we need to have the deed in our name, correct? We are able to purchase for cash, hence not needing a mortgage.\nThank you,\nGwen

Answer:
Yes, the deed needs to be in your name or names as titled on the relinquished property. Purchasing with cash is fine, even if your previous property had some debt. You can always substitute cash for debt.

About Marilee: Role of Marilee Hill, Registered Representative (RR)

Marilee Hill is a real estate professional with extensive experience in many aspects of buying and selling properties, as well as 1031 deals. In office and retail sales and leasing, owning and managing her own apartment buildings, and working with formulas and items like DSTs (Delaware Statutory Trusts), Marilee demonstrates how important it is to understand working with people.

She understands the human side of the business, and the value of truthfulness and transparency. The motto “My clients' success is my success” has stood her in good stead, in a market and role where financial savvy and people skills both matter a lot.

Please contact Marilee Hill for your next 1031 Exchange strategy.