In a 1031 construction exchange, do you need to have a certificate of occupancy before the end of your 1031 exchange period?
The short answer is no. You do not need to have a certificate of occupancy. Whatever exists as real estate, exists as real estate – that’s all that matters from the 1031 exchange perspective.
When a qualified intermediary parks a property on behalf of a taxpayer in a 1031 exchange, they often form one or more single-purpose LLCs in which to park the property in question. To transfer that property to the taxpayer, all the intermediary needs to do is re-assign the LLC membership interest to the taxpayer. For tax purposes, this is as good as deeding the property to the taxpayer. The good news is, you don’t have to go to the county recorder, show a certificate of occupancy, or anything similar.
The Contract for Deed Option
We’ve had people come to us on day 178 of their 180 day exchange period and inform us that the developer hasn’t completed the planned construction on the replacement property. In this situation, we can get a contract for deed, get the equitable title of whatever construction is completed transferred to the vendee. Even though you can’t record a deed, the contract for deed will suffice.
Find out if You Qualify for 1031 Exchange
Find out if you qualify for 1031 exchange treatment today by contacting the intermediaries at CPEC1031, LLC. Our team has been working with taxpayers throughout the United States on like-kind exchanges of all shapes and sizes for over two decades. Let us guide you through your next 1031 exchange and start deferring your capital gains taxes when you sell qualifying investment property. Contact us today at our Minneapolis office to learn more and get your 1031 exchange up and running.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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