287. Exploring Advanced 1031 Exchanges and Partnership Divisions with Matt Rappaport, Esq., LL.M.
Tax Smart Real Estate Investors Podcast
Navigating Advanced 1031 Exchanges and S-Corporation Challenges
The intricacies of using 1031 exchange funds for acquiring portfolio properties are explored, particularly the ability to introduce additional equity members after the repeal of technical terminations, which previously complicated these transactions. A significant point of discussion is the prevalence of real estate held in S-Corporations, especially in New York, where various immigrant families have successfully leveraged properties into substantial values over generations. This contrasts sharply with other regions, particularly California, where S-Corps are less common in real estate holdings. The restrictive nature of S-Corp divisions is highlighted, showcasing that they do not allow for 'drop and swap' scenarios like partnerships do, making them more complex and rigid. A further insight reveals that S-Corps are not worth engaging in legal processes unless the property value exceeds $10 million due to the exorbitant legal costs involved, which can be prohibitive for smaller transactions. Finally, the potential strategy of contributing S-Corp assets into a Real Estate Investment Trust (REIT) via a Delaware Statutory Trust (DST) is presented as a beneficial long-term plan, particularly after a two-year period when conversion opportunities arise.
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