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Ask Merlo Your Own Question
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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i have two gas stations and one is a real loser.

Customer Question

i have two gas stations and one is a real loser. can i quit claim the other gas station to my son, sell the loser to a third party, and use section 1031 rules to exchange (purchase) the property quit claimed to my son?
Submitted: 9 years ago.
Category: Tax
Expert:  Merlo replied 9 years ago.


A Section 1031 does not apply unless the like properties are being traded directly between the owners of each property. Bringing a 3rd party into this transaction would disqualify you from making any exchanges under section 1031.

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Customer: replied 9 years ago.
what about a deferred 1031 transaction? how can i qualify for that?
Expert:  Merlo replied 9 years ago.


I assume that what you are wanting to do is take the money from the sale of your "loser" station and use that money to repurchase the station that you quit claim to your son. You could do this, but you would end up paying taxes on any gain in the value of the new station you purchased. Your son would also then be liable for any gain he made on the sale.


Customer: replied 9 years ago.
would related party rules disqualify?
Expert:  Merlo replied 9 years ago.

It would not disqualify you from making the exchange, but it would require a two year holding period . If either party disposed of the exchanged property during the next two years, the transaction becomes taxable.

Expert:  Merlo replied 9 years ago.
If you could be a little more specific about what it is you actually plan to do here, I may be able to give you more guidance on this. Would be happy to help further if I can.