CES Exchange Structures & Strategies 2

Question 1

What is a 'tenant-in-common' (TIC) interest and how can it be used in a 1031 exchange?

Accepted Answer

A TIC interest is an undivided fractional interest in real property that qualifies as like-kind replacement property

Answer

A tenant-in-common interest is an undivided fractional ownership in real property and qualifies as like-kind replacement property in a 1031 exchange.

Question 2

What is a Delaware Statutory Trust (DST) and why is it used as replacement property in 1031 exchanges?

Accepted Answer

A DST is a trust structure that holds real property and issues beneficial interests that qualify as like-kind replacement property

Answer

A DST holds real property and issues beneficial interests to investors; under IRS Rev. Rul. 2004-86, these interests qualify as like-kind replacement property.

Question 3

A taxpayer wants to use exchange proceeds to purchase a vacation home that they will occasionally use personally. Is this a qualifying replacement property?

Accepted Answer

No, property used personally does not qualify unless it meets the investment use test

Answer

A vacation home must meet specific requirements (held for investment, rented at fair market value, limited personal use) to qualify — personal use alone disqualifies it.

Question 4

Under Rev. Proc. 2008-16, a dwelling unit acquired in a 1031 exchange qualifies for personal use conversion if it has been held for at least how long?

Accepted Answer

24 months

Answer

Rev. Proc. 2008-16 provides a safe harbor where a dwelling unit must be held for at least 24 months after the exchange before converting to personal use.

Question 5

In a 1031 exchange involving a multi-asset property (e.g., a motel with furniture), how are the personal property components treated after the TCJA?

Accepted Answer

Personal property components are excluded from 1031 exchange treatment and may be taxable

Answer

After TCJA, personal property (furniture, fixtures, equipment) within a multi-asset property no longer qualifies for 1031 exchange treatment and may trigger taxable gain.

CES - Certified Exchange Specialist Practice Test

CES - Certified Exchange Specialist Practice Test

CES Exchange Structures & Strategies 2