1031 Exchange Question
I was wondering if someone could give me a quick faq on 1031 exchanges. My bosses own a property that is for sale for $5.5 million, and they would obviously prefer a 1031 exchange to avoid capital gains taxes, what would be the ideal exchange that I should be looking for when I am searching properties that are for sale?
[{"id": "czjwiuq", "text": "Look for something with equal or greater value to avoid capital gains and make sure to add the 1031 exchange to the listing. From my understanding it is usually pretty tough to find a partner for 1031 exchanges. Good luck. ", "replies": [{"id": "czjwli4", "text": "Will do thanks for the response! ", "replies": [], "depth": 2}], "depth": 1}, {"id": "czk5d6w", "text": "A couple of  thoughts I'd like to share:\n\n* You need to exchange for like properties.  For instance there's a surprisingly large body of case law centered around timberland and 1031 exchanges.  In my research, it made me wonder if I was reading case law in the US or in Canada.  :S.\n* It's very helpful if the owner of the property you'll exchange on the buy side has a good capital cost allocations from their accountant.  This helps big time for depreciation calculations as it relates to unrecooperated de\n* There is more than one way to do a 1031, which includes exchanging one property for multiple properties.  You may find a goal of the exchange is to lower your risk profile, so exchanging with several smaller properties across two (or even more) markets may help.\n* It is best to identify your properties VERY quickly.  This means finding a list of candidate properties, REAL candidate properties where you're already negotiating LOIs, before you close on the sale of your property is best.  Don't wait.  That clock runs quick on the 1031.\n* As someone commented earlier, you generally want to exchange UP to higher values on your investment if you want to defer taxes on ALL of your gains.  This may involve leverage (a mortgage), or may not if you already carry a mortgage.  The value is in your invested capital, not the actual value of the property.  If your boss owns the property free and clear, then invested capital and property value is the same.\n* You don't have to 1031 ALL of your gains.  You can 1031 exchange for some of your gains, and take the rest as taxable gains.  \n* Find a good, trustworthy Qualified Intermediary.  It's not an uncommon scam to operate a QI nefariously. The big banks typically run good QI departments.\n\n\n", "replies": [{"id": "czk5pb2", "text": "Thanks this is very helpful, I'm only 6 months in working as a research analyst so I appreciate you taking the time to lay it out for me. ", "replies": [{"id": "czkakx8", "text": "The 1031s I have been involved in all used my clients attorney to close who was also the qi.  I'd do that if you can.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "czk8b8x", "text": "Find a national escrow company and ask if they have a 1031 department. Ask them all of your questions. While the top comment is well intentioned, note that you do not need to find a 1031 \"partner\".  That's not how it works. You just need to find another property to buy and close within a specific time frame. Call an escrow company before doing any more work. ", "replies": [{"id": "czkb6qz", "text": "Okay I'll do that tomorrow thanks for the tip. ", "replies": [{"id": "czmgbrz", "text": "you can use title companies as your QI, but if you're financing the purhcase the lender probably has a team as well. ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "czl6rj7", "text": "I do a lot of 1031 exchanges - we mainly help people transition into net leased.  Ping me if you want some help", "replies": [], "depth": 1}]