Lee Pitts: Non-refundable

My friend Frank was facing an all-too-common problem: he owned a beautiful ranch that his kids wanted no part of. His son in California is a budding entrepreneur (he builds hothouses for pot growers), and his daughter is a vegan/animal rightist who hates cows and cowboys. So Frank responded to an ad for anyone wanting a free meal at a fancy resort to come learn about 1031 exchanges. Who says there's no such thing as a free lunch? He even took his wife who constantly complains he never takes her anywhere nice to eat.

The lawyer hosting the meet-and-greet made it all sound so easy. They could transition out of their hard life as ranchers into a leisure retirement financed by rent checks just by swapping their ranch for apartments. And all the income from the sale of the ranch would be tax free!

Now, two years later Frank is deeply depressed despite being named customer of the month by Home Depot for buying truckloads of drywall and spackle to repair all the holes in the walls left by vacating tenants. Instead of playing golf Frank is patching roofs and replacing water heaters. He has recurring nightmares about leaky faucets. (Did you know that no two are the same?) His once peaceful life has turned into one giant honey-do list.

"It's got to be physically less demanding than ranching," I said.

"I had a stroke last year from the stress. And I miss my cows! I swear, my apartments are like a miniature United Nations and I don't speak any of the languages. I have to keep my dog on a short leash for fear she'll get eaten. And you never know when a renter will vacate the premises in the middle of the night and leave behind an old gross couch on the street for you to haul to the dump and an apartment that looks like a bomb went off in it. The cleaning deposit doesn't come close to cleaning things up. They say that when you do a 1031 Exchange it has to be for "like" property but there's nothing alike about ranching and owning apartments. They are as alike as New York City and Chugwater. When I sold my cattle at the auction market I got paid the same day. Most of these folks are four months behind!"

"Was the 1031 exchange a mistake then?"

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