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Old 04-02-2014, 02:10 PM
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1031 exchange post lot split

Hi, hope you can help. here are the facts. Primary residence purchased Apr 2013. plan to split off 1.5 acres by the end of this year and have it sold to developer. Can i do a 1031 exchange of the sold property for like kind of property in order to avoid capitol gains?

I can show that i rented out the property for income and would like to 1031 into another rental property

thanks

Lee



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Old 04-02-2014, 06:56 PM
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Originally Posted by brewbag View Post
Hi, hope you can help. here are the facts. Primary residence purchased Apr 2013. plan to split off 1.5 acres by the end of this year and have it sold to developer. Can i do a 1031 exchange of the sold property for like kind of property in order to avoid capitol gains?

#2;I can show that i rented out the property for income and would like to 1031 into another rental property

thanks

Lee
#1;Hi, hope you can help. here are the facts. Primary #1;Most people think that your personal residence does not qualify for a 1031 exchange, but it can in some situations. Let's say A and B buy a house that they live in during the first two years, year 1 and year 2. At the end of year 2, they move out and turn the house into a rental property. Now they rent it out for years 3, 4 and 5. Now lets say they sell it at the end of year 5. this property’d be able to qualify for the personal residence exclusion due to the fact A and B lived there for 2 of the 5 years preceding the sale of the property. because it was an investment property for the last year and 1 day before they sold it . this scenario also qualify for a 1031 exchange.

As long as you are dealing in real estate, it makes no difference what kind of real estate you buy, because all real property qualifies as like-kind. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange whenever you sell business or investment property and you have a gain.

#2;as mentioned abvoe



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Old 04-03-2014, 11:08 AM
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Thanks for the response. Would I be amiss to say that it is perfectly acceptable to 1031 my split property then?

or is the short answer a "yes" to my question?



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Old 04-03-2014, 07:52 PM
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Originally Posted by brewbag View Post
Thanks for the response. Would I be amiss to say that it is perfectly acceptable to 1031 my split property then?

or is the short answer a "yes" to my question?
Aslongas it is investment pty then yes;for example, as you know, Section 1031 of the Internal Revenue Code allowsyou to sell investment real property (“Relinquished Property”), have the proceeds used to purchase new investment real property (“Replacement Property”) and defer the taxes on the sale (the “Deferred Exchange”). 1031 exchanges are for investment properties, not for primary use properties. As I saiod previouslyNow you should be able to convert the property into a 'investment' property by taking on a tenant with a lease through the end of the year... that would be investment.

For reg primary residence, the provion, “ you need to reinvest the proceeds from the sale of your residence within 24 months before or after the sale, and that you hve to acquire a property which reflected a value equal or greater than the value of the residence sold, have been discontinued with the passage of the 1997 Tax Reform Act. These were formerly found in Section 1034 of the Internal Revenue Code. Currently, if a personal residence is sold, provided that residence was occupied by you for at least two of the last five years, up to $250k (single) and $500k of capital gain is exempt from taxation.



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