Can a note and trust deed sale be used in an exchange?
A note typically represents equity in the property being relinquished. Since a 1031 Exchange requires all equity be carried forward into the replacement property, the note must be converted somehow prior to receipt of the replacement property in order for the exchange to be totally tax-deferred. The Exchangor has the following options in converting the note: • Use the note and cash in acquisition of the replacement property. • Sell the note and then complete the exchange. • The Exchangor buys the note from Equity Advantage. • The note is a short-term note and is to be paid off prior to the acquisition of the replacement property. • Finally, the Exchangor chooses to pay tax on the note, exchanging only the net equity.
Related Questions
- How do we handle the situation where the Seller is doing an Exchange and they will be carrying back a note and deed of trust or mortgage?
- What is the difference between a Judicial Foreclosure / Deed of Trust Sale and a Deed in Lieu of Foreclosure?
- Can a note and trust deed sale be used in an exchange?
