1031 Tax Exchange on Listings - Mandatory?

Question

If a property is listed as "buyer to cooperate in 1031 exchange" but I would prefer to purchase outright, is this possible? There is a 4 plex I'd like to buy but I don't want to exchange my current investments. thanks

Answer 1

You can (and will) buy the property outright. The 1031 exchange has no effect on how you will purchase, but it may have an effect on how the deal is completed. The seller is legally obligated to tell you he is doing a 1031 exchange. It is a tax-saving mechanism that requires extra paperwork and can only be done within a limited time period. The hassle is all his, not yours, but he has to let you know he's doing it so that you don't have unreasonable expectations as to how quick the deal must take place and what you have to sign. It's done all the time

Answer 2

The seller is looking for tax benefits. Perhaps he would consider taking a second mortgage so that he can postpone his profits to a future date.

A 1031 Exchange, also known as a Like Kind Exchange, is a way of structuring a sale of certain kinds of property so that the seller’s profit or gain is not currently taxed. Instead, the property that is sold is replaced with another “like kind” property. If the transaction is properly structured, the seller’s profit or gain is deferred to a future date.

Section 1031 of the Internal Revenue Code, 26 U.S.C. § 1031, provides:

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."

Answer 3

This is part of a tax benefit exchange program for investment properties. From your viewpoint, you can approach the transaction as any other property acquisition deal.

Although I cannot tell with the spartan details, I don't think the seller is asking for you to exchange one of your investments; he is probably requesting that you comply with the time restraint requirements that are imposed on him as he is participating in a 1031 exchange. (There are certain time limits to a 1031 exchange that are strictly complied with for tax purposes.)

Hope this helps...

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Answer 4

McMufin is correct, and I think maybe you are misinformed about 1031. You don't exchange your property, your seller is doing the exchanging.

The 1031 is required to be disclosed, but it really doesn't effect the buyers.

Answer 5

Anything is possible! Submit your offer! The worst that can happen is the word NO!!!! The seller can still take his cash and reinvest to avoid capital gains penalty. OR, the seller can owner finance to still receive credit for interest or credit for depreciation. Dont be afraid to submit an offer, it may be the only one!!!!!