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In this current climate of lender uncertainty, we’re getting a lot of questions about “owner carry” notes and how they impact a 1031 exchange. Whether you call it seller financing, contract for deed or purchase money mortgage, what we are talking about is the amount of financing the seller of a property is willing to help the buyer with.

Let’s say that you are selling your investment property for $100,000, and the buyer of your property is able to put up $80,000 in cash (whether from a loan, his own funds or both), but the buyer needs you to carry back the difference of $20,000. You want to do a Section 1031 exchange, but you’re uncertain how the $20,000 note would affect it.

The Internal Revenue Service recently announced that Texas taxpayers—including 1031 exchangers—can have up to June 15, 2021 to file returns, identify replacement property, purchase replacement property, or make other payments due to the chaos caused by February’s winter storms. 

For affected Texans, FEMA has issued a disaster declaration for the entire state. Other tax-related accommodations can be made for taxpayers in other states impacted by these winter storms. A list of eligible localities can be found at irs.gov on their disaster relief page.

Two years ago, the IRS issued Revenue Procedure 2002-22 which blessed Tenant-In-Common, or "TIC" (rhymes with "pick") properties as qualifying for Section 1031 as replacement properties. In the last two years I've watched that industry explode. For example, a recent search on Google under "Tenants in Common" returned about 490,000 hits -- most of them sellers or "sponsors" of TIC properties. Many of our client's real estate brokers are uncertain as to what the ramifications are if they accept a commission or referral fee from a sponsor to whom they refer clients. A recent Supreme Court case would seem to answer this question -- and it isn't pretty!

The Tax Reform Act of 2017 created “Qualified Opportunity Zones” to promote investments in low income communities across the United States. The Qualified Opportunity Fund, or, “QOF,” was created to give investors capital gains tax reduction or elimination to encourage economic growth in specific areas. There are two similarities between QOFs and 1031 Exchanges: 1. they’re both tax-gain deferral strategies (and sometimes even tax elimination!), and 2. the investments must be made within 180 days from the sale of the Old Property. There’s where the similarities end. If a taxpayer decides to invest in a QOF after starting a 1031 Exchange with a Qualified Intermediary, the access to the 1031 proceeds is limited until one of two things happen: 1. If no replacement 1031 property is identified by the investor by the forty-fifth day of the exchange, the funds can be released on the forty-sixth day of the exchange. OR 2.