Can you combine the proceeds from multiple relinquished properties and purchase one bigger, better property in a 1031 exchange?
The answer, of course, is yes – you can sell multiple relinquished properties. However, this opens up a can of worms of potential issues:
Logistical issues. You need to be able to sell two properties and dispose of them within the 180 day exchange period that commences from the date of the first sale. Further, you must properly identify a big enough replacement property within the 45 day period that commences upon the sale of the first relinquished property.
Same taxpayer requirement issues. What if the two relinquished properties are not identically owned? If there’s a discrepancy you may be able to purchase the replacement property as tenants in common to avoid potential issues.
Accounting issues. You need to make sure that your new replacement property is big enough and that the proportionate interests are allotted enough ownership so that there’s a continuation into property of equivalent or greater value and equity. Any debts that are disposed of on the old properties also need to be adequately offset. Think about it this way: both sales have separate accounting 1031 requirements. You need to test each of those sales to make sure that you’re covering the value, equity, and debt components.
Like-Kind Exchange Company
If you’re searching for a like-kind exchange company to help with your next 1031 exchange – you’ve come to the right place. CPEC1031, LLC is a like-kind exchange company focused solely on facilitating exchanges under section 1031 of the Internal Revenue Code. We have more than two decades of experience working through exchanges of all types (forward, reverse, build-to-suit, etc.) Reach out to our 1031 exchange intermediaries today to learn more about the like-kind exchange process and see how we can help you defer your capital gains tax burden when selling investment real estate.
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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