Hi All,

I have client who has "Condominium" which they want to sell. It is their rental property but instead of doing 1031 exchange for another property they are looking to exchange for Gas Station. Now my question is that can they move their capital gain/Profit towards business?

They have spoken to CPA and he said that they can only exchange residential properties. But I was wondering if there is any other solution for them to invest their profit in Business and do not have to pay taxes on their capital gains?

I would say yes, he can.
Like for like.
Real estate for real estate.
(if it's just the business, no)

Call up a Qualified Intermediary.
IPX, North american Exchange, or OREXCO.
The above are major title compay backed accomodaters.They will probably confirm.

I think what he meant was that you can only exchange real estate for more real estate; a business would not be the same thing.

You can do a 1031 or "Starker Exchange" for lots of things besides real estate, i.e. buses, airplanes, railroad cars, etc., but the key to doing a 1031 exchange is that it has to be what the IRS calls a "like kind" exchange.

You can exchange real estate for real estate, a bunch of small airplanes for a large one, and so on but the items exchanged have to be similiar to qualify.

"If business property sells and the sales price is more than its depreciated basis, the seller will pay tax. However, property that qualifies for preferential treatment under Internal Revenue Code 1031 is treated quite differently. IRC Section 1031 states:

"No gain or loss shall be recognized if property held for productive use in trade or business or for investment purposes is exchanged solely for property of a like-kind."

Does the land go with the gas station? (business)
That is the question I have.

Hi,

Jim Lee & Campion, Thanks for your replies.

Campion,

No, They are not getting land with Gas Station.

Thanks!

you should consult an attorney on this one just to be sure