Hi, I have no experience with this at all but my best friend wants to exchange his duplex with his fathers. Will he have to pay a lot of taxes to do this? Are there many expences of great size they may have to pay? Thanks, Herbster
Does your friend live in the duplex? Does the father? If the property is a primary residence, then the property does not qualify for 1031 exchange tax treatment.
If the two parties just want to swap properties, then the replacement property equity and debt must greater than or equal to the equity and debt in the relinquished property for the exchange to be fully tax deferred. Unless the debt and equity in the properties is the same, one parties to the exchange will have a tax consequence.
There are other 1031 exchange rules when related parties are involved.
Thanks Dave, I follow your posts a lot and trust your opinion. Neither property is a residence although my friend whats to make one his in a couple of years. There is a great value difference though. Both places are on the same road but one is on a Lake. Probably one duplex at 120K and the lake one 275K. My friend wants the lake one.
What are or where do I find the other issues reguarding property exchanges with relatives? Thanks, Herbster
The 1031 accomodator can advise you on the specifics. I would suggest one with experience with intra-family transfers.