Income Tax Questions

Q#1 · What is the relationship between Friends and Richard for purposes of ¦1031?

Friends and Richard are tenants in common. The have an undivided ownership in the property, and there is no requirement under ¦1031 that the shares in the property be equal. The five people referred to as Friends, acting through a qualified intermediary, exchanged their interest in the trailer park for an undivided share of the ownership in the apartment complex. The qualified intermediary fulfilled the necessary ¦1031 requirements related to replacement property identification and completion of the exchange within the prescribed time limit. The qualified intermediary was not an employee of Friends and Richard within any context other than acting as a qualified intermediary to effect a tax-free exchange of interests in property for Friends. Richard paid cash for his interest in the apartment complex. Thus, the tax-free property exchange aspect of the transaction applied only to Friends and not to Richard. The like-type exchange requirement of ¦1031 applied to Friends in this transaction; however, Richard is in a position to benefit from future transactions applying to like-kind exchanges.

Authorities: U.S. Tax Code, Title 6, Subtitle A, Chapter 1, Subchapter O, Part III, Section 1031; U.S. Tax Code, Title 6, Subtitle A, Chapter 1, Subchapter O, Part III, Section 267; U.S. Treasury Regulation ¦ 1.1031(k)-1(g)4; U.S. Treasury Regul

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Approximate Word count = 860
Approximate Pages = 3 (250 words per page)

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