In a 1031 exchange, many people want to change the ownership of their replacement property after they acquire it. This is certainly possible, but there are a number of factors to carefully consider so you don’t jeopardize your exchange.
A Potential Landmine
A potential landmine that exists in this scenario is that your 1031 requires that the taxpayer who did the exchange must continue to hold that replacement property for investment or business purposes.
If a taxpayer acquires a property and then immediately does something inconsistent with holding it for investment or business purposes such as gifting it to a charity, or transferring it to a friend, or bringing their spouse into title with them on that property they may find that they are now holding the property inconsistent with the requirements of 1031, thus jeopardizing the exchange.
Let the Dust Settle
So our advice is to let the dust settle on that 1031 exchange and hold the property for a substantial period before transitioning to a different type of ownership.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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