Yes, generally you can purchase the equitable title on a contract for deed to complete your 1031 exchange and you can use the exchange funds for the initial down payment.
It may depend on if the ‘equitable title’ to the real property will be conveyed to the contract for deed vendee upon the conveyance of the contract for deed. Oftentimes equitable title is shifted to the vendee as the owner of property for federal tax purposes because the vendee has possession of the property, bears the risk of loss from damage or destruction of the property and pays the property taxes and insurance expenses (either directly or through the payments under the contract for deed).
For federal tax purposes the vendee on the contract for deed generally is deemed to be the equitable owner, and the vendor is merely holding bare legal title as an enforcement mechanism to compel payments (creditor) and full performance of the vendee. [Contracts can differ depending on terms – but this is generally the case.]
Contact CPEC1031, LLC
Looking to defer taxes on the sale of investment property? A 1031 exchange may be a good fit for you! For over two decades, the qualified intermediaries at CPEC1031, LLC have been facilitating like-kind exchanges of investment real estate. Let our 1031 exchange professionals assist you with your next real estate exchange. Contact us today at our Minneapolis offices to learn more about our exchange services and whether or not your property qualifies. We facilitate exchanges throughout the state of Minnesota and across the country.
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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