FAQs Questions about 1031 Exchange
Question: Can transfers of real estate between a business entity and its owner be considered a gift?
Answer:
No. Such transfers are not gifts because the owner receives consideration in exchange. The consideration comes either in the form of additional shares (or other indications of ownership interests) in the business entity and the business will have additional assets as a result of the transfer, or in the form of the enhanced value of the owner’s shares (or other ownership interests) as a result of the transfer. Any transfer of real estate between a business and it’s owners is taxable based on the fair market value of the assets transferred.
Question: Can transfers of real estate between a business entity and its owner be considered a gift?
Answer:No. Such transfers are not gifts because the owner receives consideration in exchange. The consideration comes either in the form of additional shares (or other indications of ownership interests) in the business entity and the business will have additional assets as a result of the transfer, or in the form of the enhanced value of the owner’s shares (or other ownership interests) as a result of the transfer. Any transfer of real estate between a business and it’s owners is taxable based on the fair market value of the assets transferred.
Question: What is a non-contractual transfer?
Answer:A non-contractual transfer is a completed transfer of real estate or of an interest in real estate made as a gift, where no consideration is paid. The transferor must have relinguished control of the real estate or interest in real estate.
| Did You Know ? |
Although not really a technical term, the word "boot" is used frequently in the world of Section 1031.
Boot is another way of saying a property is not "Like-Kind".
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