[WSBARP] 1031 Exchange and Like Kind Property

[John Teutsch]

I sent this question to Mary Foster, who authored the treatise, Tax-Free Exchanges.  Her answer follows:

Cutting rights are not like-kind to a fee interest in real estate if they are limited in duration or quantity.  Perhaps, a perpetual right to cut timber would possibly be considered like-kind to real estate.   The IRS position, supported by case law, is that cutting rights are personal property.  See Oregon Lumber Co. v. Comm. of Revenue.    This is true even if cutting rights are considered real property under Washington state law, because federal tax law governs.  See IRS Tech. Advice memo 9525002.



John Teutsch
Teutsch Partners, LLC
Cell (206) 920-8888

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Monday, April 20, 2015 6:43 PM
To: 'WSBA Real Property Listserv'
Cc: Lloyd McGee
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

Ok.  The timber gets cut under a contract to buy it, so I guess that means it is sold as real estate, right.

Who do you use as the 1031 faciltator?

James R. Doran
Attorney at Law
100 E. Pine Street - Suite 205
Bellingham, WA 98225
(360)393-9506
jim at doranlegal.com<mailto:jim at doranlegal.com>
www.doranlegal.com<http://www.doranlegal.com>

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Bryce Dille
Sent: Monday, April 20, 2015 5:21 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] 1031 Exchange and Like Kind Property

The sale of standing timber is considered as real estate see WAC 458-61A-113  since it is subject to the real estate excise tax. I have done several of these types of 1031s  and never questioned as long as timber is still in the ground when sold.

This transmission contains confidential attorney-client communications and may not be disclosed to any person but the intended recipient(s).  If this matter is transmitted to you in error, please notify the sender immediately.

Bryce H. Dille
Campbell, Dille, Barnett & Smith,  PLLC
P.O. Box 488
Puyallup, WA  98371
Voice:  253.848.3513
Fax: 253.845.4941
bryced at cdb-law.com<mailto:bryced at cdb-law.com>

Business Entity Creation and Management
Business, Government and Tax Law
Real Estate and Land Use, Residential, Commercial and Condominium Development
Real Estate and Commercial Transactions & Closings, Including Performing Services as IRS Section 1031 Exchange Facilitator
Estate Planning, including Wills and Trusts, and Probate Administration
Representation Homeowners/Condominium Association Real Estate Developments
Real Property Foreclosures and Forfeitures

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Monday, April 20, 2015 4:10 PM
To: 'WSBA Real Property Listserv'
Subject: [WSBARP] 1031 Exchange and Like Kind Property

Here is the line from the IRS information website that I think clearly denies the use of a 1031 Exchange to a the situation where the owner of real property with timber on it sells the timber and then wants to use the proceeds from the timber sale to buy more real estate.  The trees are personal property, are they not?

"Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property."

James R. Doran
Attorney at Law
100 E. Pine Street - Suite 205
Bellingham, WA 98225
(360)393-9506
jim at doranlegal.com<mailto:jim at doranlegal.com>
www.doranlegal.com<http://www.doranlegal.com>

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