A Master Lease in a 1031 exchange refers to a lease agreement in which the investor who owns the property being sold as part of the 1031 exchange enters into a lease agreement with the new owner of the property. The investor continues to receive rental income from the property while deferring the taxable gain from the sale of the property through the 1031 exchange.
Key-Takeaway
- A Master Lease in a 1031 exchange allows the investor to continue receiving rental income from a property being sold as part of the 1031 exchange while deferring the taxable gain from the sale of the property.
- The investor enters into a lease agreement with the new owner of the property and continues to receive rental income from the property.
Example
An investor sells a rental property for $500,000 as part of a 1031 exchange and enters into a Master Lease with the new owner of the property. The investor continues to receive rental income from the property and defers the taxable gain from the sale of the property through the 1031 exchange.
Tips
- Carefully review the terms of the Master Lease agreement to ensure it aligns with your goals and expectations.
- Make sure to comply with all tax laws and regulations related to 1031 exchange transactions and Master Leases.
Advice
- Consider consulting with a real estate attorney to review the Master Lease agreement before signing to ensure it’s in line with your goals and expectations.
- Consider the potential tax implications of a Master Lease in a 1031 exchange and seek the advice of a tax professional if necessary.
Recommendations
- Consider working with a 1031 exchange facilitator to ensure a smooth and successful Master Lease in the context of a 1031 exchange.
- Consider the long-term implications of a Master Lease and make sure it aligns with your long-term investment strategy.
