1031 into an investment home purchased from a family member?

I am flipping an investment skill I’ve hold for 6 months. Purchased for $42,500, have invested approx. $10,000-$12,000 in improvments, will sell for approx. $85,000-$100,000. To equivocate Capital Gains, I wish to 1031 in to an additional property. The skill I wish to squeeze around 1031 is the second home of my mother’s, that she has owned & rented out for you estimate 3 years. She purchased for you estimate $52,000, with teenager improvements. If my mom sells me this home for the expect same cost as I sell my “flip” for, (ie: I sell my flip for $92,000, as well as my mom sells me her let skill for $92,000) as well as I deposit the approx. $37,500 distinction from the “flip” as down remuneration upon my mother’s home, will you both equivocate Capital Gains Taxes? Also, what would the “holding” mandate be upon this home I squeeze from her, in sequence to equivocate Capital Gains when I do confirm to sell the home I squeeze from her? (ie: the stream renters will sojourn in the home, as well as if so, can I sell after 2 years with no Capital Gains Taxes being imposed?)

Tagged as: 1031, Family, From, Home, Into, Investment, member, purchased

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pro1031 August 29, 2010 at 4:33 am: As a 1031 Accommodator with First American Exchange Company, one of the country’s largest 1031 Accommodators, let me help answer your questions, 1 at a time.

Let me answer the complicated question first, as you are getting into “Related Party” issues. The IRS says that there are certain rules you MUST follow when buying or selling property to a related party through a 1031 Exchange. In your case, your mother must also do a 1031 Exchange. If she benefits (receives cash) through the transaction, it can void your exchange.

Let’s start with this – you need to speak with your accountant or CPA immediately.

If you email me your contact information, I can send you information about the Related Party rules that the IRS has set out. I will also include some links to this ruling below.

Lastly, you mentioned only reinvesting the profit from the sale of your property. That won’t work. Any cash that comes from the sale of your property must be used as down payment on your replacement property. If your profit is $37,500, but at the closing of your sale your proceeds total $50,000, you must use all $50,000 as down payment on your replacement. If not, you will take the balance as “boot”. This means that you will pay capital gains on the difference.

As an Accommodator registered in the State of Nevada, I help facilitate 1031 Exchanges in all 50 states. Nevada is the only state that requires registration of an Accommodator. In the other 49 states, anyone can become an Accommodator without bonding or any background checks. As an Accommodator with First American Exchange Company, a wholly-owned subsidiary of First American Title Company, your funds are guaranteed by First American Corporation, the largest title company in the industry, with a history dating back to 1889.

If you would like more information, please contact me at pro1031@yahoo.com or go to my company’s website at http://www.firstexchange.com.

1031 INTO AN INVESTMENT HOME PURCHASED FROM A FAMILY MEMBER?

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