1031 Case Study: Doing a Partial Reverse Exchange

1031 Partial Reverse Exchange

A client recently came to us with the following 1031 exchange situation and question: We are currently in the middle of our 1031 identification period. If we buy something now and sell another property after that in the same area is it possible to put the revenues from that toward the mortgage of that same property, or do we need to buy another individual property? The property we want is more than we wish to spend, but if we sold our other holding it would be more doable.

Doing a 2nd Potential Exchange

As to the second potential exchange of another relinquished property, generally, the IRS would not view paying off debt on a property that you already own as being an ‘exchange’ because you have not received anything new that you do not already own.

If the timing works, you could split the replacement property into a part reverse exchange, and hold out a portion of the replacement property to complete another 1031. Read more about this possibility here

  • 1031 Hotline: If you have questions about 1031 identification periods, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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