Related Party 1031 Exchange Transactions
Section 1031 exchanges between related parties should be carefully considered as these types of transactions have received considerable scrutiny from the IRS. Please contact your Exchange Officer for more information if considering an exchange between related parties.
Under Internal Revenue Code Sections 267(b) and 707(b), a related party is anyone who bears a relationship to the Taxpayer. Any one of the following is considered a related party:
- Family members such as siblings, spouse, ancestors and lineal descendants.
- Individual and corporation where more than 50% in value of the stock is owned directly or indirectly by or for such individual.
- Two corporations part of the same control group.
- A grantor and a fiduciary of the same trust.
- A fiduciary and a beneficiary of the same trust.
- A fiduciary of a trust and the fiduciary or beneficiary of another trust where the same person is the grantor of both trusts.
- A fiduciary of a trust and a corporation more than 50% in value of the outstanding stock in which is owned, directly or indirectly, by or for the grantor of the trust.
- A corporation and partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of capital interest or profits interest in the partnership.
- An S corporation and another S corporation or a C corporation if the same persons own more than 50% of the value of the outstanding stock of each corporation.
- Two partnerships in which the same persons own, directly or indirectly, more than 50% capital interests or profit interests.
- A partnership and a person owning, directly or indirectly, more than 50% capital interests, or profits interest, in such corporation.