Legal Question in Real Estate Law in California

1031 tax-deferred exchange = % of replacement property

I'm a married woman, and as part of a 1031 tax-deferred exchange, I just sold a free-and-clear rental that was my separate property. I'm interested in purchasing a replacement property in a resort area (same state), and the 1031 funds, held by a qualified intermediary, are just short of 3/4 of the purchase price. My question is this--if I take a 75% interest in the replacement property as my separate property through the 1031 provision, and 25% interest in either my husband and my names jointly, or his name only, can we then allocate 25% of the usage of the replacement property for our own personal use? Or would this jeopardize the 1031 status of the relinquished property? Thank you in advance for your response.


Asked on 12/23/08, 1:30 pm

1 Answer from Attorneys
George Shers Law Offices of Georges H. Shers

Re: 1031 tax-deferred exchange = % of replacement property

I do not really understand your question. Since you have exchanged a property of lesser value for a more expensive one, there is no "boot" or profit so no taxes to pay. Whether you purchase the rest of the property with community funds or separate funds determines how the remaining 25% is held as to title. If you are asking whether you can use the property 25% of the time for your own usage, it seems to me that that does not effect that you transferred like for like property so there is no change in the tax treatment.

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Answered on 12/24/08, 12:01 am


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