Can tax deferred exchange money be transferred to a residence?
March 5, 2003
Subject: 1031 Exchange
Date: Thu, 27 Feb 2003
My parents sold a house I was renting from them in November, 2002. They did a "1031 Exchange" using $80,000 worth of equity from the sale of the house to purchase a condo that cost $168,000.
I am getting married and moving out of the condo into my fiancee's home. Is there any way the "Exchange" money ($80,000) can be transferred and applied to the equity of their home?
Date: 28 Feb 2003
I don't see a way based on the facts you have presented. A personal residence generally doesn't qualify for a tax-deferred exchange. If your parents want to buy another residence, they could sell their current residence and claim the exclusion for that sale. Then they could move into the condominium and qualify it for the exclusion after two years. Then they could sell the condominium and buy the residence they want. They should not move into the condominium until more than one year after the tax-deferred exchange was completed.
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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