When it comes time to determine how you need to take title to your new Replacement Property there are several things to consider. First, it is always better to acquire your new property in the same entity as which you sold your old property. This is because you are maintaining the same taxpayer throughout the exchange. However, for several reasons, Exchangers can find that they need to transition their ownership interest into a new entity or structure for their Replacement Property. In many cases transitioning into a different entity is not a problem, provided the entity essentially remains as the same taxpayer or as a disregarded entity for the purposes of paying tax. Below are a few examples of transitioning into a different entity which will not jeopardize an exchange.
However, there are cases where the problems arising from a change in structure are significant because modifications are made to the actual taxpaying entity. Let’s look at a few problematic instances:
To avoid disqualifying the exchange, the Exchanger should not make any changes in the vesting of the Relinquished or Replacement Properties prior to or during the exchange. And, Exchangers are cautioned to consult with their tax or legal advisors regarding how their vesting issues will impact the structure of their exchange before they transfer the Relinquished Property. Remember, proper planning and negotiation can make the difference between a successful exchange and a taxable problem.
Fyntex has created tools which are designed to assist you to make better-informed decisions about your 1031 exchange. Our web based tools should not be your only source of information when you are making decisions regarding your 1031 exchange and should be treated as information only. Use it as a starting point and then seek professional advice. WE DON'T PROVIDE TAX ADVICE The calculator is not intended to be relied upon for the purposes of making a decision in relation to any 1031 exchange oriented property investment. The results generated by you when you use the calculator should not be taken to be financial or tax advice. You should consider seeking advice from a legal or tax adviser before making any investment decision. The figures are based on assumptions and are general illustrations only. They are not intended to be a substitute for professional advice.