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aieadavid
Returning Member

1031 related party son in law

For tax planning purposes, I have been unable to find a definitive answer regarding whether my son in law (my daughters spouse) counts as a related party for a 1031 exchange. I know that my spouse would be a related party, but I see no definitive answer on whether my son in law is also a relate party.

 

Thanks

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5 Replies

1031 related party son in law

The Section 1031 related party rules are controlled by Section 267(b) and an in-law would not be considered a "related party" for the purpose of the like-kind exchange.

 

However, a couple of caveats:

 

1) There could be an issue if they reside in a community property state; and

 

2) If your son-in-law decides to transfer all or part of the property to your daughter at some point, the IRS could view that as a step transaction. 

 

You should absolutely consult with local legal counsel as well as a local exchange facilitator with respect to this matter.

aieadavid
Returning Member

1031 related party son in law

The reason I was looking at this is to secure the replacement property before selling the 1031 property. Just in case a good deal came up and I could have my son in law purchase the property before I sold the 1031 property.

1031 related party son in law

I don't think I'm following the logic; what's the difference between your plan and a reverse exchange?

aieadavid
Returning Member

1031 related party son in law

The reverse exchange by the exchange company will charge $10K+ vs. a standard exchange of $1k plus closing cost.

1031 related party son in law

Understood, but then your son-in-law is going to wind up with your relinquished property (which I suppose is not an issue provided he's willing to hold it or sell it outright). 

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