1031 exchange:
Extend 1031 Exchange Deadlines
The general rule in a 1031 exchange is that an exchanger may not acquire the replacement property from a related party. There are several exceptions to this rule including a new one. An exchanger may acquire a replacement property from a related party if, in turn, the related party treats the sale of that property as relinquished property in their own 1031 exchange. The related party was thus not cashing out.
This ruling creates some interesting planning opportunities. If, as an exchanger, you are uncertain about your replacement property you can identify a property owned by an entity that you control. In essence, you can buy from your self. Completing the first exchange by buying a property which you already control, can start another 1031 exchange, effectively extending your 1031 exchange deadlines.
For example, you sell property A, titled in your name, and identify property B, owned by your LLC, ”ABC Rental, LLC” as one of your potential 1031 exchange replacement properties. Unable to buy a replacement property from a third party, on the 180th day you buy replacement property from ABC Rental, LLC. This purchase completes the 1031 exchange in your name, and starts a 1031 exchange for ABC Rental, LLC. ABC Rental, LLC then buys a replacement property to finish ABC Rental, LLC’s 1031 exchange. This technique can effectively extend your 1031 exchange purchase deadline by as much as 360 days.
We work hard to maximize your tax advantages using 1031 exchange.
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