When it comes to 1031 exchanges, you are barred from exchanging property with “related parties.” Most people assume that means you can’t exchange with anyone you are directly related to, but the rules are a bit more nuanced than that. For example, your 𝘀𝗼𝗻-𝗶𝗻-𝗹𝗮𝘄 is family but that does not automatically make him a “𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝗽𝗮𝗿𝘁𝘆” for Section 1031 purposes. We talk about why that is in this article.
Family Relationships
The tax code spells out what exactly constitutes a related party for 1031 purposes, and a son-in-law is not automatically defined as a related party. By family relationship alone, a son-in-law is not a brother, sister, spouse, ancestor, or lineal descendant. That being said, your son-in-law could still be related through a separate ownership or entity relationship.
Entity Relationships
Certain entity relationships can also create related-party status in a 1031 exchange. Under section 1031, a corporation and a partnership may be related if the same persons own more than 50% of the corporation and more than 50% of the partnership capital or profits interest.
1031 Exchange Services For Taxpayers Across the United States
At CPEC1031, LLC we provide 1031 exchange services to taxpayers across the United States, with our primary office located in Minneapolis, MN. With more than twenty years of experience in the 1031 exchange industry, our team of qualified intermediaries has the skills necessary to take your 1031 exchange across the finish line. We can advise you on the rules and requirements of section 1031, prepare your 1031 documentation, and make sure you are well-equipped to defer your capital gains tax burden. Contact us today to chat about your next 1031 exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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