If I were to do a 1031 on and 8-unit and convert and sell as condos, how, or can, I park the money, deferred, somewhere as a lump sum over time and then reinvest?
I really don’t want to pay the gains!
I thought of a TIC tenancy in common, but how hard are they to re-sell when I want my money out? Any experience with these or suggestions would be great.
You have a couple of problems with your strategy.
First you want to acquire an 8-plex in a 1031 exchange. However, your primary intent behind the acquisition is to do a condo conversion then resell the units. Since this is not a qualified investment use for the replacement property, your 1031 exchange will be disqualified and the sale of your relinquished property becomes a taxable event.
The next problem you run into is the condo conversion with an immediate resale. This is a “real estate developer” activity, and the property you subsequently sell does not meet the qualified investment use criteria to participate in a 1031 exchange.
Dave T,
Thanks for the reply. So I’ll skip the1031 on this deal because my intent is to flip them as condos. Are the gains taxed as cap gains or income?
In my case the cap gains would be cheaper, but I’d like to defer them if possible. Any thoughts?
Flip income is ordinary income. If done as a sole proprietor, LLC (disregarded entity) or within an S-Corp, report your income on Schedule C and Schedule SE.