Why would I want to accomplish a tax deferred hotel/motel exchange?

The main reason to accomplish a tax deferred exchange is to defer the income tax you would pay on the sale of your hotel/motel, equipment, furniture, televisions, washers and dryers, and computers.

What type of property from my hotel/motel sale can I exchange?

You can exchange equipment, furniture, computers, beds, television, washers and dryers, and other equipment used in your current hotel/motel for new equipment, furniture, computers, beds, televisions, washers and dryers, and other equipment that will be used in your new replacement hotel/motel.

What can I not exchange from the sale of my hotel/motel?

You can not exchange goodwill, covenants not to compete, accounts receivable, or inventory.

Who determines what percentage of the sales price is allocated to exchangeable assets or non-exchangeable assets?

Your tax advisor and hotel/motel broker should work with the buyer’s tax advisor and hotel/motel broker in order to allocate the sales price of the practice between exchangeable and non-exchangeable assets. The allocation will affect your ability to defer taxes by accomplishing a 1031 exchange, as well as the buyer’s ability to take depreciation deductions on their new hotel/motel.

Can I exchange franchise rights when I sell my hotel/motel?

Yes. You can exchange franchise rights for other franchise rights when you sell your hotel/motel and do an exchange.

Can I exchange a hotel/motel for a building?

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, tri-plexes, Tenancy-in-Common investments, etc…) However, you can not 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 considered tangible personal property while a building is considered real property. You can not exchange tangible personal property for real property. You can only exchange tangible personal property for tangible personal property.

What are the identification rules for a hotel/motel exchange?

You may identify up to three replacement hotel/motels. As an alternative, you may identify any number of hotel/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 hotel/motels as long as you acquire at least 95 percent of the aggregate fair market value of all the identified replacement hotel/motels before the end of the 180 calendar day period.

You must also keep in mind the personal property that is being transferred with the hotel/motel. If the value of the personal property exceeds 15% of the aggregate fair market value of the entire hotel/motel, then the new personal property being purchased must be separately identified.

If I own my hotel/motel as a corporation, can I purchase my new hotel/motel with a different corporation?

No. The same entity that sells the hotel/motel must purchase the new hotel/motel in order to successfully accomplish a hotel/motel exchange.

What if I find a new hotel/motel to purchase before I sell my current hotel/motel?

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.