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From:  Bonnie
Date:  Sat, 17 Jun 2006

Two brothers inherited some real estate 10 years ago. The property was worth $600,000 as of the date of death, and so no estate tax was due. The property has been rented out since it was inherited. The property is now worth $1,900,000.

A buyer wants to buy the property to tear it down and build condos.

The brothers want to separate their interests. One wants to receive cash. The other wants to exchange his interest into another property.

Can this be done? Do you handle such deals?

Answer

Date:  Fri, 07 Jul 2006

Hello Bonnie,

If the brothers have held the title to the real estate as tenants in common (undivided interests), it can probably be done.

If the brothers have operated the real estate as a partnership and filed partnership income tax returns, the partnership must make the exchange, which would spoil your deal. However, the partnership might be liquidated and, with some "seasoning" the transaction could be done at a later date.

We advise clients relating to these types of transactions and know qualified intermediaries for exchange transactions.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

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