When talking about 1031 Exchanges it is common to assume the conversation is regarding real estate, in reality virtually anything that can generate a capital gain can be exchanged… This month’s exchange is an aircraft exchange.
Our client has been a successful real estate investor for many years and was therefore aware of the 1031 Exchange process. The success he had realized enabled him the luxury of private jet ownership. It was time he upgraded the jet and he realized through depreciation a sale of his old plane would trigger a tax. He had a buyer for his relinquished aircraft and had already targeted a new one.
We were contacted regarding the possibility of a 1031 Exchange and confirmed the deal was a good one. The exchange was documented and the aircraft was sold. Within a week the new aircraft was acquired through the exchange and our exchangor was airborne in his new plane having deferred all his tax. Find out more on personal property 1031s.
Will 1031 Exchange rules allow Revocable Trust ABC with trustee and beneficiary Sally Smith as the exchanger of Property A, to purchase a like-kind property B owned by Revocable Trust XYZ with trustee and beneficiary Sally Smith who has spent $500,000 of her personal retirement savings on remodeling and upgrades. Both trusts were created 20 years ago. Both properties were/are used for rentals.
Great question! It depends on who the ultimate taxpayer is for Revocable Trust ABC and Revocable Trust XYZ. Generally, the tax payer is the grantor or truster of the trust. If that person is the same for both trusts, then no, the exchange you describe would not be allowed. If the grantors/trustors of the two trusts are related parties (spouses, siblings, ancestors, lineal descendants), an exchange could be possible if Revocable Trust XYZ also did a 1031 Exchange and acquired new investment property, and both trusts held their replacement properties for at least two years.