1031 exchanges between “related parties” are somewhat common, but can present a host of additional issues. As a result, it’s important to understand the requirements and restrictions of related party 1031 exchanges. In this article, we are going to discuss three rules to remember about related parties in a 1031 exchange.
Defining Related Party
A related party for the purposes of a 1031 exchange is defined in Sections 267(b) and 707(b) of the Internal Revenue Code. Related parties include, but are not limited to, immediate family members, such as brothers, sisters, spouses, ancestors and lineal descendants. Related parties do not include stepparents, uncles, aunts, in-laws, cousins, nephews, nieces and ex-spouses.
Holding Requirement
Another issue you need to be cognizant of with related party exchanges is timing. As a general rule, you and your related party should hold your properties for a minimum of two years after the exchange. If either property is disposed of before this two year holding period, the exchange will be disallowed. There are a few rare exceptions to this rule, but it’s a good general guideline to follow.
CPEC1031
At CPEC1031, LLC, we specialize in facilitating 1031 exchanges of real estate for taxpayers in Minnesota and around the United States. Our intermediaries have more than two decades of experience, and work tirelessly to ensure that your exchange is a success. Contact us today to learn more about the services we have to offer and set up an appointment with one of our team members. Our main office is located in downtown Minneapolis but we have satellite offices in other states as well.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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