Drop & Swap 1031 Exchanges with S-Corps

1031 Exchange S-Corp

The S-Corp issue is a problem in a drop and swap 1031 exchange. In this article, we are going to discuss some of the issues that can arise when it comes to 1031 exchanges and S-Corps.

The S-Corp Problem

Why do S-Corps present an issue when dealing with a 1031 exchange? It is much more difficult to reconfigure the ownership of the relinquished property by distributing out tenant-in-common interests from a corporation because generally the value of the property that is distributed (that is not considered a dividend) is applied first to reduce the shareholder’s basis in the corporation’s stock. Any remaining portion is treated as gain from the sale or exchange of distributed property. This does not lead to a good result from a 1031 perspective.

If the owners are in a partnership, we have much better options when it comes to 1031 exchanges of property.

  • 1031 Hotline: If you have questions about drop and swap 1031 exchanges with s-corps, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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