Related Party Exchanges

Exchanges between related parties are allowed but the Exchanger must follow specific rules for the exchange to qualify for tax deferral.

Refinancing Before and After Exchanges

Refinancing to pull equity out of a property prior to or after completing a tax deferred exchange can result in a taxable transaction under the “step transaction doctrine.”

Property Held for Resale Purposes

The intent by the taxpayer to hold property “primarily for sale” will prevent the property from qualifying for IRC §1031 treatment.

LLC Issues

Because of advantageous tax treatment combined with liability protection, limited liability companies (LLCs) have become a preferred way to own real estate in the United States.

Limitations on the Safe Harbors: The “(g)(6)” Restrictions

The 1991 Treasury Regulations for tax deferred exchanges under IRC §1031 established four “safe harbors,” the use of which allow a taxpayer (Exchanger) to avoid actual or constructive receipt of money or other property for purposes of completing a §1031 exchange.

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