I have a property/home in which I am putting on the market. If I sell the property on a lease-option to buy or owner financing, would I still be able to do a 1031 exchange? If so, then how and when (upon signing the contract or pay-off (2 years))?
Please include details in your answer.
I can also add details if more info is needed to the question.
I believe 1031 status takes effect when the 1031 trustee recieves the proceeds.
The IRS does not allow a 1031 exchange on a property sold under lease to own options. There are strict time frames involved in order for the deferment of the tax liabilities of any capitol gains under this program. I have put a website below to hopefully give you more information.
No because the property you are selling won’t pass title to the buyer until a first mortgage is secured by the buyer ( 2 years later). The property isn’t sold until the title is recorded under someone else’s name.
A 1031 exchange is premised on like for like property. The title of the property must be exchanged. When you do a lease option you are merely granting the equitable title in the property not the legal title, if the option is exercised by the renter and you do a land/real estate contract. I would recommend that you seek a 1031 realty agent specializing in such exchanges since it is very complex and if done incorrectly you can be severely punished on your taxes.
Here is some additional information that you might want to read up on
Property Exchanges 1031, 1033, 1034, 721 & 121
a simple explanation (private site)
http://www.transunionexchange.com/overview_section_1031_1033_1034_721_121_of_internal_revenue_code.asp
Best of luck on your sale and research