Due to the rise in home values, when it comes time to sell their properties, some divorcing couples may face hefty tax consequences and want to roll their capital gains from one property into another. Some of these consequences are preventable with a little strategic planning; others may not fit within the IRS Code parameters for taxable exposure.
Lately, I’ve heard a lot of people say, “We’re just going to do a 1031 exchange to save taxes.” But a 1031 exchange isn’t right for everyone. It’s important to note what it takes to qualify for a 1031 exchange, as well as know how to ensure the couple—if they do qualify—do not exempt themselves because of a mishandling of funds, or blow timelines that they didn’t know about.
I’ve outlined some basic bullets to consider below.
Note that I am not a tax professional. For anyone interested in pursuing a 1031 exchange, I cannot overemphasize enough the importance of consulting with a qualified tax professional, especially in a divorce proceeding that makes these transactions even more complicated.
Please refer to the IRS Fact Sheet for 1031 Exchanges for more information. The couple should also work with a qualified real estate professional, such as a CDRE, who understands the intricacies of these transactions to ensure they are in compliance with timelines and guidelines.
If you need advice on real property issues—or have a property that needs to be listed—give me a call or send me an email. I’m always happy to help!
CDRE, SRES, CDPE, CLHMS, GPS
Los Gatos, CA
SHANNON ROSE/ROSE GROUP
KW BAY AREA ESTATE
16780 LARK AVE.
LOS GATOS, CA 95032