1031 Exchange on Investment Property

#1 07-23-2004, 01:21 PM

"David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
- quote -

> "Mark" <mdindestin[at]cs.com> wrote:

> > I would like to liquidate a rental income property and defer
> > the gain. I've never lived in the property and have owned it
> > for several years.
> > > I have an offer from someone who would like to purchase the
> > home and we've been discussing doing an installment sale
> > with a balloon payment in one year. This is primarily to
> > get the property sold quickly. The buyer can then obtain
> > permanent financing at his convenience.
> > > Neither of us wants to do a long term installment sale.
> > > I would like to do a 1031 exchange. The problem is that I
> > will not be able to structure an exchange since I believe
> > the home is "sold" in the eyes of the IRS once the mortgage
> > and note are signed. Unfortunately, I don't have cash to
> > purchase a replacement property until I receive the balloon
> > payment in a year.
> > > I would appreciate any thoughts or opinions.

> You've effectively answered your own question. If you take
> cash or a note, you can't defer the gain with an exchange.
> If you want to exchange, you need to get it done in 180
> days. One year is too long.

Consider having the buyer take an OPTION to purchase the
property at a future date (i.e. when he will have the money
to do so). Work with a 1031 Exchange Accommodator, and have
the option money held by the accommodator, so it can be
included in the 1031 exchange.

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07-21-2004, 06:17 AM

"Mark"
<mdindestin[at]cs.com> wrote:

- quote -

> I would like to liquidate a rental income property and defer
> the gain. I've never lived in the property and have owned it
> for several years.
> I have an offer from someone who would like to purchase the
> home and we've been discussing doing an installment sale
> with a balloon payment in one year. This is primarily to
> get the property sold quickly. The buyer can then obtain
> permanent financing at his convenience.
> Neither of us wants to do a long term installment sale.
> I would like to do a 1031 exchange. The problem is that I
> will not be able to structure an exchange since I believe
> the home is "sold" in the eyes of the IRS once the mortgage
> and note are signed. Unfortunately, I don't have cash to
> purchase a replacement property until I receive the balloon
> payment in a year.
> I would appreciate any thoughts or opinions.

You've effectively answered your own question. If you take cash or a note,
you can't defer the gain with an exchange. If you want to exchange, you
need to get it done in 180 days. One year is too long.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 07-14-2004, 12:04 AM

I would like to liquidate a rental income property and defer
the gain. I've never lived in the property and have owned it
for several years.

I have an offer from someone who would like to purchase the
home and we've been discussing doing an installment sale
with a balloon payment in one year. This is primarily to
get the property sold quickly. The buyer can then obtain
permanent financing at his convenience.

Neither of us wants to do a long term installment sale.

I would like to do a 1031 exchange. The problem is that I
will not be able to structure an exchange since I believe
the home is "sold" in the eyes of the IRS once the mortgage
and note are signed. Unfortunately, I don't have cash to
purchase a replacement property until I receive the balloon
payment in a year.

I would appreciate any thoughts or opinions.

Mark

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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