1031 transfer and capital gains

[Quandary]

That is correct, you cannot like kind investment/business property for investment/business property used primarily personal use. Likewise you cannot sell property used primarily as personal use proprty for property used as a business/investment asset. Investment/business property for investment/business property of a "like kind".

 

[Boog304]

So my first thought was partially correct.
So if I sale my land thats not investment land can i sale and by a home not investment in another state.It would be my personal residence not an investment property.

You cannot do this, a primary residence cannot be any part of a 1031. 1031 are for investment properties on both sides of the buy/sell.

First of all when selling a primary residence you are already shielded from any taxes up to a $500,000 sale (assuming you are married) so you need to consider that. keep in mind, if you have owned the property you are selling more than a year, any gain is considered long term capital gain and you are treated more favorably on the taxes.

As everyone here has strongly recommended, you NEED to talk to a tax advisor that deals with land sales/home transactions.

 

[timberland]

That is correct, you cannot like kind investment/business property for investment/business property used primarily personal use. Likewise you cannot sell property used primarily as personal use proprty for property used as a business/investment asset. Investment/business property for investment/business property of a "like kind".

but I can sell personal use property for another personal use property and still use the 1031, correct?

 

[Brooks051]

so I am looking at selling my hunting property and using a 1031 exchange to avoid as much tax liability as possible. I have a potential buyer for mine and a property I can purchase. The issue is my property has about 75,000 more value than the new property. I believe I would have to pay capital gains on only the difference, but thats still a bunch.

I heard I can buy the new property under a mortgage equal to the sale price of mine, and pocket the difference. I was wondering if anyone has gone through this process?

I have considering using land contracts for both transactions, but would end up paying a lot of income tax with that strategy.

Any other suggestions or things I should consider?

I have a 1031 specialty gal that can answer all your questions. Shoot me a direct message.

 

[Boog304]

but I can sell personal use property for another personal use property and still use the 1031, correc

No, both properties have to be owned for "Investment Purposes" and neither can be your primary residence.

Now you may want to stop calling these "personal use properties" and start calling them "investment properties" (which most people can say the property was an investment). You can use a 1031 property for personal use as well, there are some IRS rules around that but you would have to look into that.

 

[timberland]

So I bought it, logged it, and added value by building a cabin, which I have slept in about 5 times. My intention was always to grow the value and sell. Sounds like an investment property to me. Same strategy with the purchase property

 

[Boog304]

So I bought it, logged it, and added value by building a cabin, which I have slept in about 5 times. My intention was always to grow the value and sell. Sounds like an investment property to me. Same strategy with the purchase property

Yup, id call that an investment property for sure. You will need a qualified "Intermediary" which may be what Brooks051 is referring to. They are necessary in a 1031 exchange and can help advise you.

 

[cfounta1]

His like kind property was the real estate portion of his business. I should've specified but assumed that is what we were talking about

 

[Quandary]

No you can not. You can do a 1031 exchange for "personal property" that is investment property or trade/business property. Personal Property in this context is property other than Real Property (real estate) for example a CNC machine used by a gunsmith for chambering barrels.

 

[Quandary]

So I bought it, logged it, and added value by building a cabin, which I have slept in about 5 times. My intention was always to grow the value and sell. Sounds like an investment property to me. Same strategy with the purchase property

For mixed use property it comes down to the nuances. How much personal use, how often etc. Was the cabin built to supervise the logging activities?Ddid other family or friends use the property etc., etc. A great example is a vacation rental property. Used to much for personal use no. Used under 14 days a year and held for rent the rest of the year yes.

 

[7mm-08]

By now it should be landing that you need tax and legal guidance in this process from folks who specialize in this area and not Internet sources. I'd start with Brooks051's offer to have a conversation with his contact.

 

[2-Stix]

I have a good CPA and that was just one part and frankly the least important. I used a 1031x company and they helped the realtors and CPA get it all correct. I ended up running a reverse 1031x then a regular next.

Here is the short of it... we had a commmercial (my office)/residental (rental) duplex property in escrow that would sell for $10, it fell out but we moved forward on a residental property that cost $8. We did the reverse 1031x and had to self-fund or get a loan until the property sold. Once it sold we repaid the $8, and used the $2 balance to buy a second residental property for $4 . They need to rent for 2 years before we are allowed to move into one of them.

Whatever you don't spend in the exchange you pay capital gains on. We sold 1 and bought 2 with a loan on one of the 2nd properties.

There are timelines you must hit for this all to work that are critical.