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Property Eligible for 1031?
I owned a property that was considered a single family but had two separate gas and electric meters so it could be used as an "up and down" duplex. For the past 4 years I have lived on the first floor and rented the second and third floors. My only income for these 4 years is the rental income I derive from this property as well as a one bedroom house I also rent out.
Business is good and I can't keep up with demand. So this year I sold this property for $234k. I bought a legal duplex for my business for $164K. I bought a condo to serve as my residence for $51K. I sold the property and purchased the two new properties on the same day - it was May of this year.
Is the duplex I purchased eligible for the 1031 exemption? Or if not, another type of exemption from capital gains? i do not plan to sell the duplex - it's a long-term investment and will always be used as a rental property.
Thanks for any help or advice you can provide-really appreciated!
4 Antworten
- vor 7 JahrenBeste Antwort
It's not an exemption, it's a deferral of the capital gains taxes. Your personal residence is not eligible for a Section 1031 exchange so you'd have to apportion the gain between your residential portion and the business use property.
The gain attributable to your personal residence portion would qualify for a Section 121 exclusion as long as you owned and lived in it for any 2 of the 5 years immediately prior to the sale and have not claimed the exclusion in the past 2 years.
I would strongly urge you to seek competent professional tax advice from a CPA or EA. Section 1031 exchanges are complex and it's easy to mess it up. If you didn't use a facilitator to complete the transaction the odds are good that it won't qualify.
- ?Lv 7vor 7 Jahren
The purchase of the duplex may have qualified for a 1031 exchange if it was purchased within 90 days of the sale of the prior property. You need to consult with a tax specialist as the dual use of the prior property creates some issues.. Good Luck
- NALv 7vor 7 Jahren
"I sold the property and purchased the two new properties on the same day" is NOT a 1031 eligible event. You have three events. You sold and bought. This is NOT an exchange. It's too late to try and characterize any of this as an exchange.
The portion of gain for your personal use is still eligible for the 121 exclusion. The rest is taxable.
- realtor.sailorLv 7vor 7 Jahren
When you sold the property for $234K there should have been reference in that contract the sale was a 1031 exchange. Apparentlythere wasn't. Since you have closed on the purchase of the new duplex you cannot defer any tax liability from the $254K sale. Consult a tax advisor before you sell again.
