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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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