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<p class="MsoNormal">Hi John, Presuming that these buildings are not mobile homes I think they qualify. After the 2018 tax law change only real property is eligible for 1031 exchange. The IRS looks to each individual state to determine the definition of real
property verses personal property. For example, under WA law a mobile home is personal property until you go through the title elimination process, at which point it becomes real property. Presuming these buildings are stick built or mobiles with titles
eliminated, they would be real property under WA law. The next level of inquiry is does the entire interest in real property need to be transferred to qualify for an exchange. The answer is no. You can transfer less than the entire interest. An example
would be the sale of a conservation easement. The easement is a real property right and is sold separate from the fee interest. Conservation easements are eligible for 1031 exchange. In your example, with the aforementioned caveats, I think the structures
are real property which can be sold separately from the fee interest in the land. The rule on leases is that it must be 30 years or longer to qualify the
<u>LEASE</u> as real property. In the matter at hand the lease is not being transferred so its length is irrelevant. I am curious how escrow is going to transfer the interest in the structures? Deed or bill of sale? Pay excise or sales tax? I think
the obvious answer is deed and excise tax. That will need to be monitored to confirm the asset is truly being treated as the real property that it is. If there are other factors, please feel free to give me a call to discuss. If the client’s QI is not willing
to proceed let us know and we will facilitate for them. We have been a QI since 1992. Thanks, Craig
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<p class="MsoNormal"><span style="color:#4472C4">Gourley Law Group<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#4472C4">Snohomish Escrow<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#4472C4">The Exchange Connection<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#4472C4">PO Box 1091 Snohomish, WA 98291<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#4472C4">360-568-5065</span><o:p></o:p></p>
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<p class="MsoNormal"><b>From:</b> wsbarp-bounces@lists.wsbarppt.com <wsbarp-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>John L<br>
<b>Sent:</b> Monday, November 05, 2018 3:55 PM<br>
<b>To:</b> wsbarp@lists.wsbarppt.com<br>
<b>Subject:</b> [WSBARP] 1031 Exchange<o:p></o:p></p>
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<p class="MsoNormal" style="text-autospace:none">Good Afternoon,<o:p></o:p></p>
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<p class="MsoNormal" style="text-autospace:none">I have a client who is selling a business which includes buildings on leased ground. The buyer has negotiated a new lease with the ground owner. The sale does not include any value for the lease. The 1031
exchange facilitator believes that the building sale proceeds may not be part of the 1031 exchange because the original ground lease was for a period less than 30 years.
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<p class="MsoNormal" style="text-autospace:none">Thank you for your opinions. <o:p>
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<p class="MsoNormal" style="text-autospace:none">Thank you. <o:p></o:p></p>
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<p class="MsoNormal" style="text-align:justify"><b><span style="font-size:14.0pt;font-family:"Harlow Solid Italic";color:#1F497D">John H. Loeffler<o:p></o:p></span></b></p>
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<p class="MsoNormal"><b><span style="color:black"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><b><span style="color:black">Olson Loeffler Law Group, P.S.<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="color:black">8414 N. Wall, Suite A<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="color:black">Spokane, Wa 99208-6171<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="color:black">Phone: 509.467.6767<o:p></o:p></span></b></p>
<p class="MsoNormal"><a href="mailto:JohnL@Ollps.com"><b>JohnL@Ollps.com</b></a><o:p></o:p></p>
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or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending any transaction or matter addressed herein to another party.<o:p></o:p></span></i></b></p>
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