June 2005 - 1031 Tax Exchange Newsletter

Home 1031 Exchange 1031 Podcasts Online Handbook Is Your Money Safe? Selecting Your Accommodator The Timeline Our Fee Schedule Newsletters August 14,2008 March 6, 2008 March, 2008 December, 2007 July 2007 November 2006 May 2006 April 2006 March 2006 January 2006 November 2005 October 2005 August 2005 June 2005 (2) June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 February 2004 January 2004 FEA Code of Ethics and Conduct Office Directions Contact Us Classes & Presentations Links

Exchanges with Related Parties - what are the rules?

If a taxpayer exchanges property with a related person and defers the recognition of gain under Section 1031, no gain is recognized if each related party holds its property for two years. Gain will be recognized if the taxpayer disposes of the replacement property or the related person disposes of the taxpayer's property within two years after the date of the last transfer that is part of the exchange transaction.
Rev. Rul. 2002-83: Taxpayer may not transfer relinquished property to an unrelated party and acquire replacement property from a related party if the related party has a high basis in the replacement property and receives cash or non-like kind property, pursuant to Section 1031(f).

Section 1031(f) is designed to prevent taxpayers from using Section 1031 to shift tax basis between properties owned by related parties.

The issue arises whenever a taxpayer transfers the relinquished property to an unrelated party and acquires the replacement property from a related party, even if the taxpayer holds the replacement property for more than two years.

Disallowed Transaction

Allowed Transaction

In the allowed transaction, both the taxpayer and the related party must hold their properties for two years.

Any person bearing a relationship to the taxpayer described in IRC § 267(b) or § 707(g)(1) is a related party, including:

a. Members of a family (which include brothers and sisters, spouse, ancestors, and lineal descendants).

b. Two corporations, which are members of the same controlled group.

c. An individual in a corporation more than 50 % in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual (attribution rules apply).

d. A corporation and a partnership if the same persons own more than 50% of the outstanding stock of the corporation and more than 50 percent of the capital interests or the profits interest in the partnership (attribution rules apply).

e. A grantor or fiduciary of any trust.

f. A partnership and a person owning, directly or indirectly, more than 50 percent of the capital or profits interest in such partnership (attribution rules appy).

g. Two partnerships in which the same persons own, directly or indirectly, more than 50% of the capital or profits interest (attribution rates apply).

h. Executor and beneficiaries of an estate.

For SB&OH Exchange Accommodators call: 253-512-1031 or tollfree 866-309-1031

Home 1031 Exchange 1031 Podcasts Online Handbook Is Your Money Safe? Selecting Your Accommodator The Timeline Our Fee Schedule Newsletters August 14,2008 March 6, 2008 March, 2008 December, 2007 July 2007 November 2006 May 2006 April 2006 March 2006 January 2006 November 2005 October 2005 August 2005 June 2005 (2) June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 February 2004 January 2004 FEA Code of Ethics and Conduct Office Directions Contact Us Classes & Presentations Links	Exchanges with Related Parties - what are the rules? If a taxpayer exchanges property with a related person and defers the recognition of gain under Section 1031, no gain is recognized if each related party holds its property for two years. Gain will be recognized if the taxpayer disposes of the replacement property or the related person disposes of the taxpayer's property within two years after the date of the last transfer that is part of the exchange transaction. Rev. Rul. 2002-83: Taxpayer may not transfer relinquished property to an unrelated party and acquire replacement property from a related party if the related party has a high basis in the replacement property and receives cash or non-like kind property, pursuant to Section 1031(f). Section 1031(f) is designed to prevent taxpayers from using Section 1031 to shift tax basis between properties owned by related parties. The issue arises whenever a taxpayer transfers the relinquished property to an unrelated party and acquires the replacement property from a related party, even if the taxpayer holds the replacement property for more than two years. Disallowed Transaction Allowed Transaction In the allowed transaction, both the taxpayer and the related party must hold their properties for two years. Any person bearing a relationship to the taxpayer described in IRC § 267(b) or § 707(g)(1) is a related party, including: a. Members of a family (which include brothers and sisters, spouse, ancestors, and lineal descendants). b. Two corporations, which are members of the same controlled group. c. An individual in a corporation more than 50 % in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual (attribution rules apply). d. A corporation and a partnership if the same persons own more than 50% of the outstanding stock of the corporation and more than 50 percent of the capital interests or the profits interest in the partnership (attribution rules apply). e. A grantor or fiduciary of any trust. f. A partnership and a person owning, directly or indirectly, more than 50 percent of the capital or profits interest in such partnership (attribution rules appy). g. Two partnerships in which the same persons own, directly or indirectly, more than 50% of the capital or profits interest (attribution rates apply). h. Executor and beneficiaries of an estate. For SB&OH Exchange Accommodators call: 253-512-1031 or tollfree 866-309-1031

	Olympic Exchange Accommodators, LLC 1401 Regents Blvd, Suite 102 \| \| Fircrest, WA 98464 Tacoma 253-512-1031 Toll Free 866-309-1031 Fax 253-414-3500 Email: jhelsdon@olympic1031.com ©2010. Olympic Exchange Accommodators, LLC (Copyright & Disclaimer) A member site of the nwRealty Network of Real Estate Brokers, Agents and Affiliates. Development, hosting and maintainance provided by nwRealty Internet Application Services.