1031-exchange-rules-advanced-strategies

When to Use Advanced 1031 Strategies

This page offers a modern breakdown of advanced strategies and tactics for 1031 exchanges.

It’s for those times when a standard 1031 won’t cut it.

And you need to get creative.

Now, some of these may increase your tax risk. Thankfully, 1031x has been at this for decades. We’ll show you how to use these safely 😉

So when should you consider one?

Let’s review.

Advanced Strategy #1

Don’t Simply “Buy First, Sell Second”

Set Up an Exchange Accommodation Titleholder

Sign a Qualified Exchange Accommodation Arrangement

Secure Financing for the EAT

Close on Property Through EAT

Lease Property from EAT

Complete “Forward” Part of Exchange

Advanced Strategy #2

Don’t Directly Use 1031 Proceeds to Fund Improvements

Don’t Improve Property You Already Own

Assign the Replacement Property Contract to an EAT

Sign a Project Management Agreement

Oversee the Improvements

Transfer Improved Property (or the EAT) to You

Advanced Strategy #3

Make Sure You Know Which Assets Are More Tax-Efficient

You Can Permanently Exempt Capital Gains Taxes by Converting a Replacement Property

You Can Convert an Old Primary Residence and Exchange It

Advanced Strategy #4

Don’t Refinance the Relinquished Property Just to Avoid Taxes

Make Sure You Have an “Independent Economic” Reason

Make Sure Your Lender Allows a Refinance of Replacement Property

The Term “Related Person” Is Specific and Defined in IRC § 267(b) and 707(b)(1)

Related Party Prohibitions Are Designed to Stop “Basis Shifting”

Easy to Sell to, yet Difficult to Buy from Related Party in a 1031

Advanced Strategy #6

What Is Owner Carryback Financing?

How Is Seller Financing Different Inside a 1031 Exchange?

Better Strategy #1 — Outside Cash

Better Strategy #2 — Make the Note Payable to Your Qualified Intermediary

Better Strategy #3 — Exclude the Note and Deed from Your 1031

Conclusion