Somewhat of a 3-way 1031 exchange?

[lapsonluu]

Hello!

I hope you are doing well. I have a bit of complicated 1031/tax implication scenario that I am researching. 

Person #1 owns a property in city M and is looking to sell.  She is looking to do a 1031 exchange, however, she has not put up city M property for sale yet. She has found a commercial property in city F with an amazing deal and doesn't want to let the opportunity pass. She has approached reverse 1031 exchange companies to ask for their advice and has learned she rather not go this route.

Here's where I need guidance on the best way possible without incurring major tax consequences. 

She owns a company that is able to purchase city F property and have it hold it under the company's title while she gets city M property ready for sale.

When she sells M property, she will "buy" F property from her own company and initiate a 1031 exchange between the two properties under her personal name. How can we go about transferring the property between the company and the person without incurring tax compilations? Or is there a way she can bypass "buying" the property from her company and 1031 can be done between the company/owner and the buyer? 

The fact that is the owner of her own company and she's making transaction under her personal name makes this a little complex. 

Thanks in advance!

[BobKamman · Accepted solution]

Google has about 189,000 hits with "Section 1031" and "related party."  None of those answered your questions?  

[lapsonluu]

Thank you!

First time coming across this scenario so I wasn't sure what the term/phrases is called. 

Thank you for the tip. 

[lapsonluu]

So this is the actual scenario after doing research. 

Taxpayer has rental property M (her personal name holds the title) to sell but still needs to set up the selling process. She came across property F and thought it was a fantastic deal. She has considered doing a reverse 1031 but has considered the process very risky.

This is her thought process on another way to go about it.

She proposes to use her company (100% ownership) to acquire the property F first. In the meantime, she’ll also put up property M on the market (relinquished property). When she has an accepted offer, she can request the buyer to cooperate with her under 1031 tax deferred exchange through an accommodator. Then, she will identify property F (hold by her company) as the replacement property. Both sides (Taxpayer & her company ) will need to open an escrow to finalize the exchange, thru also the same accommodator.

The question is: will her exchange meets the qualification by the IRS due to the fact she’s also a member (or shareholder) of her company?

I'm sure the answer is no and this is definitely not the correct way to go about this process. Based on what she's telling me, it sounds like it's more of a 1031 exchange between her own properties with an unrelated buyer involved. Based on my research so far, her company will need to either gift or tax the property to her. Or the company will need to hold property F for 2 years unless they can prove this transaction should qualify as an exchange. 

Is that the correct way of going about it?