Inquiry: A client recently wrote in with a question about a friend's option. He had held it for more than a year and had a considerable profit in it. He was told by two 1031 exchange intermediary companies that he could not exchange his option.
My Answer: I believe your friend has a good position on the ability to do a tax-free exchange for his option rights. It has been done successfully in the past. Some considerations are the holding period of the original option, the holding time of the replacement property, and the property optioned being mainly real estate and not a business or containing a large amount of personal property, like a hotel or restaurant. I would be happy to help him through the transaction and he should establish his exchange intent before he completes a sale of his option.
The Result: a SALE of the option AND a tax-free exchange into real estate. How'd you like that?
i love to hear your common sense strategies – especially the ones i share!http://www.roupadebebe.org
Yes to the former and no to the leattr. After-Tax dollars are different than Roth designated contributions mostly because the tracking mechanism wasn’t in place for after-tax dollars.
Tax strategies are many and varied. You get to choose the ones you like but not let CPAs or attorneys choose them for you, if they do not fully understand 1031 tax-free exchanges, trusts, LLC’s, IRAs, options and other legal procedures that are available.