The Flip Board

City Center, the $8 billion-plus resort under construction in Las Vegas, won a crucial victory when its lenders and owners struck a deal that guarantees the project will be finished.

The Shanghai government is trying to orchestrate the buyout of a twin-tower hotel project as its chief backer wavers about the cost of completing it.

Dallas real-estate mogul Harlan Crow is backing an effort to prohibit city ownership of convention hotels.

Developers in Dubai are scrambling to prevent a wave of investor defaults as they struggle to survive the city-state's real-estate bust.

(Listen Here 2:53 min)

A lot of people wonder, Can I purchase my replacement property on a Contract for Deed?” As financing gets more and more challenging, seller arranged financing looks more appealing. So, if we can find a seller that will convey the property to us on a Contract for Deed, will that property work as a 1031 replacement property?

How Can This Work for a 1031 Exchange¦
if I do Not have Full Legal Title?

The question might be lingering in the back of your mind. Yes, I know that I am the vendee, but I know that the vendor still has legal title. I also know that as a purchaser under a Contract for Deed, I dont receive the actual deed until I am done making my payments. So, query whether this qualifies as a 1031 Exchange.

The Question is¦Who is the Owner for Federal Tax Purposes

The answer is probably because a Contract for Deed vendee receives the benefits and burdens of ownership. And, you want to make sure that your Contract for Deed is drafted so that it does give you the benefits and burdens of ownership because you bear the risk of loss of the property if destroyed, because you bear the obligation to pay the property taxes, because you have exclusive possession of the property. All of these factors really weigh on the side of you being the equitable owner of the property and the equivalent of the owner of a fee interest in real estate for Federal Tax purposes.

Put the Exchange Funds Down as the Down-Stoke¦
If You are the Owner

 So, you can purchase your replacement property on a Contract for Deed. In theory, you would take all of your proceeds, all of your net proceeds from your relinquished property and plunk that down as your down-payment. Then you would make incremental installment payments going forward until the Contract for Deed is satisfied at which time you would receive the deed for the property. However, in the interim, you are the equitable owner of the property, and that should be sufficient to complete your 1031 Exchange.

Sentiment surrounding home-building companies in the options market is mixed, despite an embrace by traders on Friday.

Given the huge commercial real estate exposures at banks, investors need to pay special attention to a critical benchmark used to value things like office buildings.

Fontainebleau Las Vegas is suing lenders over the cancellation of a key financing agreement for the development.

H. Ross Perot Jr.'s Hillwood Development is forfeiting its stake in a 75-acre development in downtown Dallas to its German equity partner.

(Listen Here 3:06 min)

Sometimes people want to do a 1031 Exchange into a property that they plan on immediately occupying as their home. And, they wonder to themselves well, I know that I have to treat my replacement property as either business property, property used in my trade, or as investment property. Well, I hope that my personal residence goes up in value, so it must be an investment, right?

Recent 1031 Tax Court Case on 1031 Property Exchange of Lake Cabin

In a case called Moore vs. The Commissioner of Internal Revenue, a similar question was put before the tax court. A person was trying to do a 1031 Exchange from a second home lake cabin into a bigger, better second home lake cabin. The taxpayer in the case said Well, you know that this is a scarce commodity, and I anticipate that it will go up in value. I hope it goes up. The taxpayer was trying to make the argument that, even though it was his second, his lake cabin that he never rented out, never advertised as a business property that it was held for investment, so that it should qualify for 1031.

Hoping For an Increase In Value on Your
Personal Use Property  Investment

The tax court did not buy this argument. They said Yes, everybody hopes that their primary residences and second homes go up in value. But, we really need to look at how you use the property to decipher what your intention was. Was your intention primarily to use the property for recreational and personal use? Or, was your intention to hold it for investment?

1031 Lesson Learned Do Not Hold Primarily for Personal Use

Under the facts of the Moore case, the taxpayer was found to primarily hold the property for personal use. So, getting back to our question, Can I call my replacement property home/personal residence an investment, especially if I move into it immediately after I have completed my exchange? The answer is probably, no. That would not qualify because your use as your home is antithetical, completely opposite to use in ones business, use in ones trade, or holding for investment.