{"id":27288,"date":"2019-09-15T15:44:37","date_gmt":"2019-09-15T15:44:37","guid":{"rendered":"https:\/\/www.affiliated1031.com\/converting-an-apartment-building-into-a-condominium-is-this-a-viable-1031-procedure\/"},"modified":"2019-09-15T15:44:37","modified_gmt":"2019-09-15T15:44:37","slug":"converting-an-apartment-building-into-a-condominium-is-this-a-viable-1031-procedure","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/converting-an-apartment-building-into-a-condominium-is-this-a-viable-1031-procedure\/","title":{"rendered":"Converting an Apartment Building Into a Condominium \u2013 Is This a Viable 1031 Exchange Procedure?"},"content":{"rendered":"<div  class=\"tatsu-h6utn1y3lf87mudx tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6utn1y3nw24f78f\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6utn1y3paejmcjz\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6utn1y3qf544qn1  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6utn1y3qf544qn1.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style>\n<p>The case law on this type of 1031 Exchange transaction shows that the IRS may consider the exchanger to be a <strong>\u00abDealer\u00bb<\/strong> rather than an investor which will disqualify the transaction as a 1031 exchange relinquished property sale.\u00a0 The case law varies in outcomes, but generally, this is not a safe way to proceed.\u00a0<\/p>\n<p>Here is an example of a case where the seller could have used a 1031 exchange to realize greater returns.<\/p>\n<p><u>FACTS:<\/u>\u00a0 I am going to call this the \u201cLittle Old Lady from Pasadena\u201d example.\u00a0 We had a client that owned a 20 unit apartment building with her husband in Pasadena, California, for over 25 years.\u00a0 The husband dies and the surviving spouse, who is now in her middle 70\u2019s,\u00a0 decides to sell this investment property and then purchase a Replacement Property, that is not as Management Intensive. The apartment building has appreciated considerably since the client and her husband had purchased the property 25+ years ago.\u00a0 \u00a0Her \u00a0Realtor advised her that she can make a considerable amount more of a profit if she sells each of the units as a Condominium and she, the Realtor, will also make more of a commission.\u00a0 A Win-Win situation for both the \u201cLittle Old Lady from Pasadena\u201d and the Realtor.\u00a0\u00a0 The Realtor is very successful and obtains contracts for the sale of all of the units.\u00a0\u00a0 Prior to closing on any of the units, the seller decides to do a <a title=\"Link to What is a Sectin 1031 Exchnage\" href=\"https:\/\/liberty1031.com\/what-is-a-1031-exchange\/\" target=\"_blank\" rel=\"noopener noreferrer\">Section 1031 exchange<\/a> with the proceeds. Read the Lesson\u2019s Learned section below for the rest of the story.<\/p>\n<p>\u00a0<\/p>\n<p><u>LESSON\u2019S LEARNED:<\/u>\u00a0\u00a0 The \u201cLittle Old Lady from Pasadena\u201d was found to be a \u201cDealer\u201d, not an \u201cInvestor\u201d because she converted an investment into a business of selling units, due to multiple sales and multiple buyers.\u00a0 As a result, she will be taxed ordinary income taxes on profits.\u00a0 She would have received as a net figure, more money if she had just sold the entire building.\u00a0 She could also have completed a Section 1031 exchange.\u00a0<\/p>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6utn1y3paejmcjz.tatsu-column{width: 100%;}.tatsu-h6utn1y3paejmcjz.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6utn1y3paejmcjz > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utn1y3paejmcjz > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utn1y3paejmcjz > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6utn1y3paejmcjz > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6utn1y3lf87mudx .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6utn1y3lf87mudx > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utn1y3lf87mudx > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utn1y3lf87mudx .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The case law on this type of 1031 Exchange transaction shows that the IRS may consider the exchanger to be a \u00abDealer\u00bb rather than an investor which will disqualify the transaction as a 1031 exchange relinquished property sale.\u00a0 The case law varies in outcomes, but generally, this is not a safe way to proceed.\u00a0<\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/converting-an-apartment-building-into-a-condominium-is-this-a-viable-1031-procedure\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[64],"tags":[],"class_list":["post-27288","post","type-post","status-publish","format-standard","hentry","category-liberty1031-exchange-case-studies-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27288","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27288"}],"version-history":[{"count":0,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27288\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}