Discussion:1031 Exchange and REITS

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Discussion Forum Index --> Tax Questions --> 1031 Exchange and REITS

Desertwonderer (talk|edits) said:

28 September 2006
Somewhere I heard that you can use REITS in a 1031 Exchange but I have not been able to find it again. Anybody out there know the answer?

Dennis (talk|edits) said:

28 September 2006
The key is Tenant in Common interest,

Riley2 (talk|edits) said:

29 September 2006
An interest in a REIT is evidenced by a certificate of beneficial ownership or a corporate stock certificate. Such property is not eligible for Sec. 1031. See Internal Revenue Code ยงยง 1031(a)(2)(B) and 1031(a)(2)(E). Also, see Lakritz v. U.S., 38 AFTR 2d 76-5726 (418 F.Supp. 210), 08/12/1976.

WirelessWayne (talk|edits) said:

12 February 2007
I've read that the 1031 exchange can occur for a REIT using IRS Section 721 in conjunction with the 1031. No gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership.

Is this true? It sounds like you need to make special arrangements with the REIT in advance, anyone know the particulars?

LH2004 (talk|edits) said:

12 February 2007
You don't need sec. 1031 at all. In the simplest structure, the REIT holds all of its real estate in a partnership, of which it is the largest partner. The investor contributes his property to the partnership in exchange for partnership interests. The REIT offers to accept additional partnership interests in exchange for stock in itself at any time (possibly subject to conditions) at a fixed exchange ratio.

Most REITs are formed this way.

Glmpllc (talk|edits) said:

12 February 2007
Classic UP-REIT structure. I believe when it was first done, it received an A Plus for tax planning from the WSJ.

Kurthenry (talk|edits) said:

9 July 2008
I see that an interest in a REIT cannot be exchanged for a property. My question is Can you exchange a building you own into shares of a REIT thereby deferring taxes until you sell that REIT interest you have now acquired?

Kevinh5 (talk|edits) said:

10 July 2008
no, but consider Dennis' solution: TIC interest

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