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New Revenue Procedure Allows Related Party 1031s under Certain Conditions

Some Long Believed Exceptions Confirmed 

Included in recently issued Revenue Procedure 2014-3 were some exceptions to 1031(f) related party rules. A 1031 exchange transaction between related parties has long been viewed as risky but no guidance has clarified some exceptions we long believed would work.

The definition of a related party for exchange purposes are family members such as parents, siblings, spouse, ancestors and lineal descendants.  Those that are not considered related are aunts and uncles, cousins, nieces and nephews, ex-spouses and stepparents.  Related parties are not just family members, it may also be a corporation, partnership or other entity of which more than 50% of the stock or capital interest is held by the same taxpayer directly or indirectly (�267(b) or �707(b)(1)). 

Aggressive taxpayers with a low basis property have attempted exchanging with a related party for a high basis property so the related party could sell the property recognizing little or no gain.  The IRS considers this structure to be tax avoidance and in 1989, subsection (f) was added to Internal Revenue Code Section 1031 imposing special rules for exchanges involving related parties.  Section 1031(f) denies non-recognition treatment to a taxpayer exchanging property with a related party if the taxpayer or the related party would dispose of the property within a two year period.  There is also a "catch-all" provision which states that if the taxpayer took a series of steps to avoid the transaction being classified as a related party transaction, it is still a related party transaction.  The IRS will simply cut out all of the middle steps and see if you have arrived at the same result that you would have if you didn't take the step(s). 

Last month, our article about Structured Sales generated so much interest that we have decided to reprint and also schedule a webinar on Thursday, January 30th to give everyone the opportunity to learn more.


Local to our Collegeville headquarters? We welcome you to come into our office and participate live. Registration is required and seating is limited but lunch with be provided. Call 610-792-4880 to register. 

Structured Sales Offer 1031 Alternative

Tax-Deferral Strategy Opens New Options

A 1031 exchange is an excellent tax-deferral strategy that helps business owners and investors build and preserve wealth. Unfortunately, not all assets qualify for 1031 treatment and some sellers no longer wish to reinvest in other like-kind property.


A "Structured Sale" is an improved version of the traditional installment sale provisions in IRC �453. Instead of receiving a lump sum cash payment upon the sale of the property, the seller receives installment payments spread over a number of years and the gain is deferred over the life of the note with taxes only due when payments are received. A Structured Sale combines the security of a cash sale with the tax benefits of an installment sale.


Unlike a traditional installment sale, the Structured Sale requires only minimal cooperation from the buyer at the time of sale, with no ongoing involvement. In an installment sale the Seller must rely on the buyer's financial   ability to make the future payments, while in a Structured Sale payments are secured by a third-party assignment company, similar to a structured settlement. The Structured Sale also allows the Seller to customize the payment stream to maximize their benefits while receiving a pre-tax rate of return on principal.


Read more about Structures Sales


Structured Sales Webinar

Structured Sales: An Alternative Tax-Deferral Solution


Thursday, January 30th

12:00 - 12:45 pm Eastern


This webinar will highlight the short and long-term benefits of a Structured Sales. It will also feature a discussion about the Structured Sale Fall Back product.  Many of our clients have used this powerful tax-deferral strategy for:

  • failed 1031 exchanges

  • remaining equity left over after successfully acquiring all desired 1031 replacement property

  • non-exchangeable assets, such as the sale of a business, a primary residence with a selling price over $250K/$500K, etc.

  • when our clients want out of real estate all together but are still interested in a tax-deferred strategy.

 Register Now! 


Local to our Collegeville headquarters?

We welcome you to come into our office and participate live. Registration is required and seating is limited but lunch with be provided. Call 610-792-4880 to register.

Trending this Month...  

Multiple Replacement Properties   

Exchangers are leveraging their buying power and acquiring multiple replacement properties to complete their 1031 exchange.  The increased buying power is a direct result of the ROW OF HOUSESExchanger's ability to defer their gain and keep all equity invested in replacement property. 1031 exchanges provide the opportunity to grow an investment portfolio with pre-tax dollars.

              View All Recent Trends  
Wealth Building Webinars
Every Thursday, join us for one of our complementary Wealth Building Webinar Series sessions designed to help you build and preserve wealth.  Register today!
January 30th:  Structured Sales: An Alternative to 1031 
February 6th:  1031 Exchanges Made Easy
February 13th:  Current Trends in 1031 Exchanges
February 20th:  Advanced 1031 Exchange Topics
Upcoming MCE Classes
Seminar (MM)

Our Margo McDonnell, CES� and Richard Heller, Esq., CCIM, CES� both have a number of upcoming continuing education courses for real estate professionals and attorneys scheduled at the Association of REALTORS� School in Malvern, PA.

Click on the course title below for dates, program descriptions and registration information.

1031 Tax-Deferred Exchanges presented by Margo McDonnell.

Taxation of Residential Real Estate presented by Rich Heller.



Message from our President

Cupcake with Blue Candles

1031 CORP.

recently celebrated its 23rd Anniversary

Dear Friends, 

To say I am thrilled about 2014 is an understatement! A few weeks ago, 1031 CORP. marked its 23rd anniversary and we are so grateful to all of you for helping to make that happen. This year, I will celebrate 20 years since I started with 1031 CORP. What a journey it has been and I am so excited about what lies ahead. I look forward to sharing many exciting things with you throughout the year.

I hope 2014 is great year for all of us!

Best Regards,
About 1031 CORP.
Serving as a nationwide qualified intermediary for 1031 tax-deferred exchanges since 1991, 1031 CORP. strives to provide a superior exchange experience for our customers and their advisors.  We provide our customers with enhanced security of funds, knowledgeable exchange professionals and a commitment to keep the exchange process simple for our customers and their advisors.  Every member of the exchange team is a Certified Exchange Specialist� and has the experience and expertise to facilitate even the most complex exchange transaction, including reverse, improvement and personal property exchanges.  Additional information can be found at www.1031CORP.com.
In This Issue
New Revenue Procedure Allows Related Party 1031s under Certain Conditions
Structured Sales Offer 1031 Alernative
Structured Sales Webinar
Trending this Month
Wealth Building Webinars
Upcoming MCE Classes
Message from our President
Article Exchange

Margo McDonnell

Margo McDonnell, CES
Certified Exchange Specialist
1.800.828.1031 ext. 212
Mobile: 610.680.6896
Find me on Facebook
View my profile on LinkedIn

1031 CORP. Logo

Sue Umstead, CES 
Certified Exchange Specialist
Senior Vice President
1.800.828.1031 ext. 208
Mobile: 610.755.8520

Find me on Facebook
View my profile on LinkedIn

1031 CORP. Logo

Marissa LoCascio, CES
Certified Exchange Specialist
Senior Exchange Officer
1.800.828.1031 ext. 210
Mobile: 610.742.4351

Find me on Facebook
View my profile on LinkedIn

Rich Heller

Richard Heller, Esq., CCIM, CES
Find me on Facebook
View my profile on LinkedIn

 Bettye Matthews

Bettye J. Matthews, CPA
View my profile on LinkedIn


Joseph F. Szajnecki, CES�
Article Exchange

Following are articles related to 1031 exchanges, taxes, real estate and related topics you may find of interest.


14 Predictions We Like for 2014

Real Estate Prognosticators see CRE Recovery Continuing To Accelerate in 2014

CoStar Group

December 31, 2013 


When It Comes to CRE, Banks Prefer to Lend, Not Lease

CoStar Group

January 22, 2014  


Existing-Home Sales Top 5 Million in 2013 - Best Year Since 2006 

Philadelphia Business Journal

January 23, 2014


Philadelphia Forges Plan to Rebuild from Decay 

The New York Times

December 31, 2013


If you have an article you would like to share, please forward it to Margo McDonnell, CES� and we'll include it in next month's reading list.
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