Near North University hosted a webinar on August 5th titled, Tackling the 1031 Exchange: Common Challenges and Solutions, presented by John Lamberts, President, 1031 Exchange & Senior Underwriting Counsel. A Question & Answer session was held at the end of the webinar, but there was not enough time to address all of the questions. John has prepared a response to some of these unanswered questions below.
Question: Are foreign investors qualified for 1031?
Foreign Investors can utilize 1031 tax deferred exchanging to preserve capital. They are however impacted by FIRPTA, the good news is a foreign seller can apply for a FIRPTA withholding certificate with the IRS to reduce the required withholding amount at closing, thus, increasing the amount of cash to fund the purchase of 1031-Exchange replacement property.
Question: Is recapture of ordinary income from depreciation deferred under a 1031?
Generally, if you trade improved property for improved property, there will be no depreciation recapture. If you trade improved property for vacant land, the depreciation you took on the building located on the Relinquished Property will be recaptured and taxed as ordinary income.
