Aug

18

Is a 1031 exchange possible with a currently owned property?

Filed Under Home :: Real Estate 

Carl G asked:


Typical exchange 1031 involves the subsequent purchase of a property after a sale. My situation is a little different. I want to apply the gain on the sale of one investment property, against a mortgage balance on a second investment property which I currently own. Would that transaction be allowed as a 1031 exchange?

Victoria
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    • Comments

    3 Responses to “Is a 1031 exchange possible with a currently owned property?”

    1. v b on August 22nd, 2010 4:10 pm

      Actually your question is, I want to sell property A and not pay the taxes on it now.

      The answer is no, you pay the tax bill.

    2. wexeter on August 23rd, 2010 3:24 am

      Unfortunately, no. The sale of your investment property is a sale of a real property interest. The pay down or pay off of an existing mortgage is not a purchase of a real property interest. The mortgage pay down is actually a personal property interest and will therefore not qualify for 1031 exchange treatment.

    3. Real Estate pro on August 24th, 2010 5:04 am

      You can’t do it directly; you might be able to finagle an additional real estate purchase with the mortgaged property of your second investment, between two corporations you control to do what you want to do in deferring the capital gains taxes but it will probably require some legal expertize that will cost you money.