2001 was my first significant exchange. I was bundling a couple’s 58 properties, selling them over a five month period, into multiple exchanges. The properties were titled differently (some were in his name, some were in hers; others they held together or in partnerships), with low five-digit to modest six-digit prices, and all with different debt-to-cash ratios. A super learning experience! You can bundle any number of properties into one property, observing the closing date of the first property closed as defining your ID period, and then using the end settlement date for the remaining properties closed. For ID purposes, if properties one, two and three close on February 1st and properties four, five and six close on February 27th, your ID deadline for all six is 45 days after February 1st.
The converse is also true; when selling one property and buying three or four properties, the selling property’s closing date determines your ID period and end settlement date. You can use the ‘three-property identification rule’ – it’s real simple, just count to three. If you’re dealing with four properties, you must use the 200% rule of identifying four properties totaling not more than 200% of the selling property. Let’s say the property sold for $1.5 million, all cash. You can identify real estate totaling $3 million with any ratio of cash and debt, as long as you use all of your $1.5 million of cash
Question 1:
I am selling a home in California that I am currently renting. Once i sell it i was going to use this money to purchase one to 3 homes in GA. My question is would I be taxed on any of these homes since the money is being used for purchase or is this money only non taxed for just one home? Thank you!
Answer:
There is a three property identification rule : • You can identify three properties • You must buy equal or greater than exchange cash plus debt • Regardless, whether the investor buys one or all three, the investor completes his exchange.
Question 2:
Client exchanged one property into 4 different TICS, how do I allocate the new basis to the 4 different TICS? thank you.
Answer:
Proportionately – • Total exchange funds are $1.25M., including debt • Property one is $250K including debt = 20% location of old basis • Properties 2 and 3 are each $300K including debt = 24% and 24% location of old basis • Property 4 is $400,000 including debt = 32% location of old basis
About Marilee: Role of Marilee Hill, Registered Representative (RR)
Marilee Hill A real estate professional with significant experience in various markets, Marilee Hill entered the securitized 1031 exchange field in 1999. After managing apartments, dealing with DSTs (Delaware Statutory Trusts) and generally analyzing sales and leasing markets, Hill has helped clients to succeed in their 1031 exchange goals.
There’s more to real estate, though, than numbers. There’s the ‘human side’ of the business, and the value of transparency and good faith dealings between parties. Marilee knows how to work with sponsors, brokers and dealers to get results for her clients.
Please contact Marilee Hill for your next 1031 Exchange strategy.
