Related Party Rules--Uneven Values

Mr. Hickox, our situation is a bit confusing so I would appreciate you reading the following and answering the 3 questions.

 

G & J  and A&I  own two properties together - one-half interest each as tenants in common.  It is A & I  desire to cash out of both properties.  Property A will have a sales price of $300,000 (150,000 each) and Property B will have a sales price of $230,000 (115,000 each).

 

If property B sells first, can G & J  1031 their $115,000 and buy A & I  interest in Property A for $150,000.

 

If property A sells first, can G & J  1031 $115,000 of their $150,000 and buy A & I  interest in Property B, paying tax on the $35,000.

 

If the properties sell within 180 days of each other and we are unable to purchase one of the properties from A & I, can  we, G & J  1031 the proceeds of both sales as long as we purchase something valued at $265,000 that was identified within 45 days of the first closing and closes within 180 days of the first closing?

 

I really appreciate your help and assure you that whenever these properties close we will 1031 whatever we can using your firm's services.  Thank you for your assistance in this very complicated matter.

 

Dear J:  Related party rules in a 1031x can be rather complicated.  Can you please tell me how G&J and A&I are related?   Another strategy that you might consider is this: Decide which building you prefer to own on a longer term basis.  Swap (1031x) your 1/2 interest in the other property for their 1/2 interest in the chosen property.  Of course if you chose the smaller property you will end up still owning a small piece of the larger property or you will have to pay them cash and incur some tax liability (trade down in value).  Does that idea work for you?  Sincerely,

Steve Hickox

Attorney / President