1031 exchange to children

[vdo]

California

There's a clause in 1031 exchange about arm's length and related parties transaction that I am not sure applies. Can a father buy his daughter's property at fair market value through a 1031 exchange? Can the daughter still leverage the home sales capital gain exclusion under this type of transaction?

For example, father sold his property for 500k.

Buys the daugther's property for 500k throught a 1031 exchange.

Daughter originally bought the house for 250k. The fair market value of the home is now 500k. The home sales exclusion would allow the daughter to not pay capital gain on the 250k

 

[LdiJ]

California

There's a clause in 1031 exchange about arm's length and related parties transaction that I am not sure applies. Can a father buy his daughter's property at fair market value through a 1031 exchange? Can the daughter still leverage the home sales capital gain exclusion under this type of transaction?

For example, father sold his property for 500k.

Buys the daugther's property for 500k throught a 1031 exchange.

Daughter originally bought the house for 250k. The fair market value of the home is now 500k. The home sales exclusion would allow the daughter to not pay capital gain on the 250k

If daughter sells her primary residence to anyone, related or not, she will get the 250k exclusion.

Dad buying daughter's home would not be an arms length transaction. Dad would need to speak to a third party 1031 exchange facilitator, which may or may not be a real estate attorney.