Odd 1031 Questions
So a good friend is selling two buildings totaling around $700,000 and would like to 1031.
I have a building which has a value of about $1.5 million and debt of about $800,000.
Can my friend exchange into a TIC with me in this building? She will recieve a net of about $250,000 I would sell her a TIC interest for that amount down, allow her to assume an ownership interest in the debt.. Currently I hold ownership in an S corp which is purchasing under a land contract. We could put together a new TIC entity and I could transfer my Land Contract to that entity.
Presumably there would be some tax burden to me by selling the partial interest but I have a big loss carryforward that would wipe out most of that.
Hi CommercialKing,
Yes, your friend can certainly purchase an undivided XX% interest in your property as a tenant-in-common as part of her 1031 exchange transaction. You will need to make sure that her 1031 exchange values work out O.K. She would need to trade equal or up in value (selling for $700K and buying for $700K or more based on sales price). She would need to reinvest all of her cash coming from the sale of her $700K properties. She would need to replace the mortgage value that was paid off in her sale. If these values line up correctly, then she has no problem.
How does she hold title to her buildings? She would need to buy the TIC interest in the same "taxpaying entity", so be careful about forming a new TIC entity. A new entity may result in her actually acquiring an interest in the entity and not an interest in real estate.
Feel free to call me with any additional questions.
[addsig]
What you suggest would certainly work, but it is not always easy to find one investor that will buy the whole lot. You will need to do a lot of networking on sites like this. You can certainly save on broker commissions and other costs by doing this, but it will take a lot of networking to find the right connection.
[addsig]
Thank You...I will continue to "network."