Will a Related Party 1031 Exchange be Taxable

We respond to a reader's question on related party exchanges

Photo by Karsten Würth on Unsplash

Siblings that inherit farmland may find that their ownership of parcels is not what is desired. For example, two brothers might inherit 50% of two fields. Each brother would prefer that they own 100% of each field versus 50% of every field.

The Tax Code allows the brothers to swap 50% ownership for 100% ownership, however, the key requirement is that neither brother sells any of the property within two years of the swap.

But what happens if the swap includes some cash to “equalize” the swap. Will this create taxable income to either party. As with all tax questions, the answer is “it depends”.

This now leads us to the reader’s question: