Buying from family? The rules get stricter.
Exchanging with a related party is allowed, but both sides generally have to hold for two years or the deferral unwinds.
Related-party exchanges
Two years, on both sides
If either party disposes of its property within two years of the exchange, the deferral can be disqualified retroactively.
Buying from a related party is the harder case
Selling to a related party and buying from an unrelated one is generally cleaner than the reverse. The reverse draws the most scrutiny.
Basis shifting is what the rule targets
The concern is a related pair using an exchange to move gain onto the lower-taxed side. Expect the structure to be examined on its economics.
Three steps, and we carry most of them
Call before you close
We confirm an exchange fits, map the deadlines against your timeline, and put the exchange agreement in place before the sale closes.
We hold the proceeds
Funds go from the closing table to us, never to you. That is what keeps the deferral intact.
You buy, we close it out
You identify and negotiate the replacement property. We handle the documentation, the funding and the reporting trail.
1031 Specialists
Related-party exchanges are not prohibited, they are scrutinized. If the replacement property is coming from a parent, a sibling, or an entity you control, say so at the start so the structure can be built to survive a look rather than repaired after one.
We are a qualified intermediary for IRC Section 1031 tax-deferred exchanges, facilitating exchanges for real estate investors in all fifty states. We handle the exchange agreement, the identification and closing deadlines, and the custody of exchange funds. Every exchange includes unlimited tax optimization consulting, audit protection and an attorney guarantee, on a simple flat fee you pay at close.
Related-party exchanges, answered
Who counts as a related party?
Family members and entities in which you hold a controlling interest, among others. The definition is broader than most investors assume.
What is the two-year rule?
Both parties generally must hold their properties for two years after the exchange. An early disposition by either side can cost the deferral.
Can I buy from my own LLC?
Possibly, but it is a related-party transaction. Bring it up before anything goes under contract.
Talk to someone before the clock starts
Reach me directly, or call the main line and ask for anyone on the exchange team.
Main line
(631) 438-1031General email
info@1031specialists.comMailing address
30262 Crown Valley Pkwy, Suite B 464Laguna Niguel, CA 92677
The information on this page is general in nature and is not tax or legal advice. 1031 Specialists is a qualified intermediary, not a law firm, accounting firm or investment adviser. Consult your own tax and legal advisors about your circumstances before entering into an exchange.