Many taxpayers ask the question: “is it possible to do a 1031 exchange when purchasing via a contract for deed?” With interest rates going up fast, we are seeing this question come up frequently.
The simple answer is yes. You can buy 1031 exchange replacement property on a land contract, instalment purchase / contract for deed.
You can purchase your replacement property on a contract for deed if it is drafted in such a way that the vendee is deemed the equitable owner, and factors like risk of loss, exclusive possession, obligations to (directly or indirectly) pay property taxes and insurance may come into the analysis.
Out of an abundance of cation we would probably add some text to the Contract for Deed to state “that the vendee is the equitable owner of the real property (subject to the vendor’s creditor’s position) for federal tax purposes.”
1031 Exchanges for Tax Deferral
1031 exchanges are a prime tool for capital gains tax deferral. When done correctly, a like-kind exchange can help you defer taxes and keep your money compounding and building wealth in a continued investment over time. CPEC1031, LLC can help facilitate your like-kind exchange by guiding you through the entire process and making sure you are satisfying all the requirements. Give us a call today to learn about the full extent of our 1031 services and see if we can help you with your next 1031 exchange of real estate.
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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