1031 Exchanges for Divorcing Couples

1031 exchange divorced couple

What do divorced people need to know about 1031 exchanges? Here are some things to consider when juggling a 1031 exchange and a divorce.

Financial Issues of Divorce

When you get divorced and receive a property in a marital termination, you may receive 100% ownership of the property or you might split the ownership with your ex-spouse.

Alternatively, your ex-spouse may have a lien against the property you are selling. So if you've been divorced and now you are selling an appreciated asset, you need to be particularly concerned with the tax ramification of your sale of that property. If you own the property 50/50 with your old spouse, each of you as co-­sellers could separately do 1031 exchanges, or one spouse may choose to do an exchange while the other ex-spouse may choose to take their tax hit.

Marital Liens

If you received 100% ownership of the property in the divorce but your spouse maintains a marital lien on the property, you'll need to pay off that marital lien at the closing of the relinquished property. And then when you acquire your new replacement property you want to make sure that your new property is of equal or greater value than your old property, that you've reinvested all of your net proceeds, and that you've offset any debt relief including the marital lien with new debt or new cash in on the replacement property.

  • 1031 Hotline: If you have questions about 1031 exchanges during a divorce, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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