TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, November 22, 2013

Section 1031 Like-Kind Exchange of Condominium Units for Cooperative Apartments

Valeriya Avdeev (William Paterson University, College of Business), Another Potential Capital Gain: Can an Exchange of Condominium Units for Cooperative Apartments Qualify as a Section 1031 Like-Kind Exchange?, 15 Duq. Bus. L.J. 165 (2013):

After reviewing the hypothetical transaction, it appears that it would not qualify for non-recognition treatment under section 1031. As such, if tax-free treatment is desired, the transaction must be restructured. Perhaps, the LLC could transfer title back to the owner and have the owner hold the property for a period of time, while renting it out. If that approach is too costly, the owner could seek a private letter ruling to settle uncertainties with both the exchange element and with the like-kind requirement. Also, perhaps a better strategy would be to not convert the future cooperative apartments completely to personal use and use it as a vacation property, if so, very minimally.

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