The main reason for accomplishing a tax-deferred exchange is to defer the income tax you would pay on selling your hotel/motel real estate.
You can exchange only tangible property used in your current hotel/motel in California for other tangible property used in your new replacement hotel/motel purchase in California.
You cannot exchange goodwill, covenants not to compete, accounts receivable, or inventory. Other than in California, you cannot exchange equipment, furniture, computers, beds, televisions, washers, dryers, and other equipment.
Your tax advisor and hotel/motel broker should work with the buyer’s tax advisor and hotel/motel broker to allocate the practice’s sales price between exchangeable and non-exchangeable assets. The allocation will affect your ability to defer taxes by accomplishing an exchange and the buyer’s ability to deduct depreciation on their new hotel/motel.
No. You cannot exchange franchise rights for other franchise rights when you sell your hotel/motel and do an exchange.
You may exchange the portion of your hotel/motel sale that is allocated to real property with other types of real property (commercial buildings, apartment buildings, duplexes, triplexes, Tenancy-in-Common investments, and DSTs); however, other than in California, you cannot exchange equipment, furniture, beds, washers and dryers, and televisions for real property because they are not like-kind assets. The equipment, furniture, beds, washers and dryers, and televisions are tangible property, while a building is considered real property. You cannot exchange tangible property for real property. You can only exchange tangible property for tangible property.
You may identify up to three replacement hotels/motels. Alternatively, you may identify any number of hotels/motels as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of the hotel/motel you relinquished. As a final option, you may identify any number of hotels/motels if you acquire at least 95 percent of the aggregate fair market value of all the identified replacement hotels/motels before the 180-calendar-day period ends.
You must also consider the tangible property transferred with a hotel/motel sale. Suppose the value of the tangible property exceeds 15 percent of the aggregate fair market value of the entire hotel/motel; in that case, the Exchangor must identify the new tangible property as being purchased separately.
No. The same entity selling the hotel/motel must purchase the new hotel/motel to accomplish a hotel/motel exchange.
If you find a new hotel/motel to purchase before you sell your current hotel/motel, you may accomplish a 1031 reverse hotel/motel exchange. Please see the tab for reverse exchanges for further details on how to do so.
The above information is provided for general information purposes only. You should discuss your actual individual property transaction with your current attorney, certified public accountant, or us.
We know you will have questions about your transaction and encourage you to contact us. We will be pleased to assist you.
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