IRC Section 1031 tax-deferred exchanges have been favored
by a large number of our clients during the past several years.
Two of the most interesting ones of late are worth a few remarks.
- One client sold four
rental homes through an exchange for their retirement home in
the process of being completed. The retirement home will
be used as a rental for a period of two years, so it qualifies
as a "like
kind" exchange. At that time the investor will move into
the house. If they don't sell, for three years, the gain
may be tax-free.
In the event of death, it becomes a different structure through
new tax law, family trust and inheritance.
other transaction involved exchanging some 18 homes for commercial
All of the homes were tenant-occupied with leases, increasing
the challenge. All of the homes required some work to
make them market-ready. The rentals provided a sizable
equity in the exchange as well as previous long-term tax shelter
benefits for the owners.
of our owners are exchanging, moving up to higher-priced investment
homes in the greater Phoenix area. They are moving out of older homes,
we have managed for 10-20 years, using our services to acquire newer
homes 5-8 years old. This has provided them with a means of
obtaining additional tax write-off without suffering tax consequences
due to sale of investment property.