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Exchange Basics, 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.

Exchange Basics, Part 2

Back in the old days, many deals were cash only. But now, 1031 exchanges have become more sophisticated in multiple ways. The real professionals have been involved in the TIC and DST exchange markets. We have clients all over the country, access to the experts with knowledge in esoteric abstract 1031 issues and we are able to make our deals work according to IRS regulations.

One of the central premises for a 1031 exchange is that investors are going to save taxes. Sound simple - when you want to take out a chunk of cash and have a high basis? Think again. Then there is confusion - the sale of your primary residence is Section 121, not 1031, except where you have a rental unit or a rental on your primary residence. Are you doing like kind to like kind? — a pro knows how to check and provide a solid path forward.

A ‘like kind’ property refers to real property including what individual states define as real property such as timber and mineral rights from which you can facilitate 1031 exchanges. Geographically the definition is limiting to U. S. , U.S. Virgins Islands and Guam. If you own a property outside of the U.S. you have to exchange that property with another foreign property — France to Mexico, etc.

Question 1:
I have a single family home in Palmdale, CA which we have been renting since 1988. I want to exchange it with a commercial property in the North Dallas area where I now resides. What is the best way to go about it using this 1031 exchange?

Answer:
1. Hire a Qualified Intermediary
2. Go to settlement with the QI’s papers in hand
3. Use cash and debt on an equal basis
4. Put the money into the new property
5. Add debt or cash to the deal

Question 2:
I have a single house I've rented for 12 years which is paid off. I'm going to sale the house but would like to buy another rental house in another city. I bought this house in 1990. Not sure how a 1031 works.\nThank you, Mary

Answer:
Two United States properties are like kind to each other. Engage a Qualified Intermediary before you go forward with the details of a 1031 exchange deal.

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

Although the 1031 exchange is a basic concept, a lot of these deals raise significant questions – whether you want to know about what constitutes a complete exchange, the role of cash versus data, or how you deal with deductible expenses, ask Marilee Hill.

Marilee Hill has the experience to help you with a 1031 exchange. She came into the exchange field in 1999 having already managed her own apartments and learned a lot about with a real estate process.

Please contact Marilee Hill for your next 1031 Exchange strategy.

The Role of the QI, Part 2
Like Kind Exchange - Asset Class, Part 2