You are right. In order to COMPLETELY defer the taxes in a 1031 exchange, “the target property - properties - must be of equal or greater value.” Keep in mind that I’m no expert on 1031 exchanges but I think that if Hope exchanges into properties that have a total value less than her original property, she would simply have a current tax liability for any “boot” that she receives. You were right on with your advice to Hope to have an expert help her.
BTW, whatcha doin’ in UT, Rising Star or workin’ with John Behle or both? Give my best to your hubby!
Posted by Hope(Fl) on September 17, 2000 at 05:47:14:
I have a single family home worth 150,000 that I would like to exchange for 3 or 4 lower priced properties to total approx. 150,000. Can I do this, or can I only exchange 1 for 1? TIA
Dew is right about lining up your replacement property in advance if possible - it may be quite a challenge to find 3 property in 45 days. In fact I just had this very situation in front of me and I only managed to spend 2/3 of the money sitting in the coordinator’s account. So I got about $8,000 unused back and will have to pay taxes on it. When you have some time pressure things can get tricky. I had 2 homes under contract and both fell through, so I could not use the funds.
One other thing I may suggest: check with the title company where you close your deals. They may have a local exchange coordinator who they deal with very often. If the coordinator is local you’ll be able to come to their office and get a free consultation.
Posted by dewCO on September 17, 2000 at 18:59:30:
Also your single family home needs to be an “investment” property in order to do the 1031 tax exchange, and the ones you are buying would need to be the same.
If your market is hot, you might want to locate and “tie up” the properties you are going to go into, becaue the 45 days to indentify may not be enough time!
Ask your title company for good Exchange Accomodators or Intermediaries, too. Then as JPiper says, make sure you understand the whole process and ALL THE RULES! You don’t get any do overs or second chances if not done right the first time.
Posted by JPiper on September 17, 2000 at 08:59:29:
This is an area that you definitely need some expert guidance in. API is one expert…website address is apiexchange.com…their phone number is listed there.
Here are the three rules for property identification in an exchange:
You can identify a maximum of 3 properties without regard to FMV.
You can identify any number of properties as long as their combined FMV doesn’t exceed 200% of the relinquished property.
You can identify any number of properties without regard to their combined FMV as long as you close on 95%.
Keep in mind that this identification must be made within 45 days from the close of the relinquished property AND you must close within 180 days from the closing date of the relinquished property OR the tax filing date, whichever is earlier. This latter issue (the tax filing date) may well become an issue at this time of the year, so pay attention to it.
Again, seek out expert guidance…if you don’t comply with exchange rules your exchange may be disallowed.
Posted by Carol on September 17, 2000 at 08:07:25:
yes, but …
The target property - properties - must be of equal or greater value.
Would highly suggest you call someone like API and have their experts walk you through the basics. They were extremely helpful and competent. I don’t have their number handy, but post the qtn to JPiper… I’m sure he can shoot it to you.
Carol