We learned in a past segment that the 1031 Exchange involves the purchase or sale of investment property. Investors who own their property with partners typically require more planning, specifically checking on how they hold title. Julie Bratton, Vice President of Old Republic Exchange Company, and Kay Mukaigawa of Engel and Volkers, joined us to dive deeper into the popular topic of the 1031 Tax Deferred Exchange.
Julie shared, “You need to remember that Exchanges are taxpayer driven. IF the property is held as Joint Tenants or Tenants in Common, you usually can do your own exchange. Example- If I own a property with my sister and we are selling it for $500,000 and we own the property as Joint Tenants or Tenants in Common, we can go our separate ways. I can do an exchange with my 50% and she can take her 50% and pay taxes if she wants! If we owned the property in a Trust, Multi Member LLC or a Formal Partnership, then we could not. In this case, the Entity owns the property, not my sister and me. The Entity would most likely need to do the exchange. So, when you own properties in entities, you cannot move around as independently as you want, when you want tax free!”
If you have any questions for Julie Bratton or would like to talk more about entities, vacation rentals or investments, call 808-725-2000.
For more on Engel and Volkers Honolulu, visit honolulu.evrealestate.com.