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  • 1031 exchange with land sale for vacation home

    From JGE@21:1/5 to All on Fri Oct 15 20:24:02 2021
    I purchased a vacant lot in my sub-division (catty-corner to the lot my house is on) 20+ years ago. I want to sell it to help fun a vacation house. I'll net a profit of $200,000 or so on the land sale. I'm trying to figure out if I can avoid
    capital-gains taxes on the land sale by using a 1031 exchange.

    I gather the land and the vacation house are considered "like kind" simply because they are both real estate. But I'm unclear if one or both need to be considered to be investment property, as opposed to property for personal use.

    I'm also afraid that the timing will prevent this. I have no expectation that when the land sells, that I will somehow be able to identify the vacation house to be purchased within 45 days (I believe I'm allowed to designate 3 and must close within 180
    days). If not, am I out of luck ?

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  • From Stuart O. Bronstein@21:1/5 to JGE on Sat Oct 16 02:50:17 2021
    JGE <johngeyles@gmail.com> wrote:

    I purchased a vacant lot in my sub-division (catty-corner to the
    lot my house is on) 20+ years ago. I want to sell it to help fun
    a vacation house. I'll net a profit of $200,000 or so on the
    land sale. I'm trying to figure out if I can avoid capital-gains
    taxes on the land sale by using a 1031 exchange.

    Not with the characterizations you are using for the properties.

    I gather the land and the vacation house are considered "like
    kind" simply because they are both real estate.

    Sorry, but they're not. A personal residence does not qualify for a
    1031 exchange. And a vacation house is a personal residence.

    But I'm unclear
    if one or both need to be considered to be investment property, as
    opposed to property for personal use.

    Both of them have to. If you sell the lot and buy a house that you
    use as a rental for six to twelve months, that might qualify.

    I'm also afraid that the timing will prevent this. I have no
    expectation that when the land sells, that I will somehow be able
    to identify the vacation house to be purchased within 45 days (I
    believe I'm allowed to designate 3 and must close within 180
    days). If not, am I out of luck ?

    You can find the land to purchase before the sale of your property
    rather than after, and still qualify. Once you identify a property
    you want to buy, you have to complete that purchase within 180 days
    of when you transfer title to your current property. Other
    participants are often willing to work with you to make sure the
    timing works.


    --
    Stu
    http://DownToEarthLawyer.com

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    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
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    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
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  • From JGE@21:1/5 to All on Sat Oct 16 10:58:12 2021
    My main point of confusion is the requirement that both the relinquished (my land) and the replacement property (the vacation home) be held either for investment purposes or for productive use in a trade or business. I suppose I could call the piece of
    land (that I'm about to sell) an investment - there's nothing concrete saying my intent was otherwise (e.g. future construction of a larger primary residence). Apparently the vacation home must also qualify as investment. If so, does that mean I have
    to follow the rules about only being there 14 days, etc ?


    ========================================= MODERATOR'S COMMENT:

    Please include the part of the prior post to which you are responding,
    and respond after the provision you are responding to. Otherwise people
    may have to work harder than necessary to understand the context.

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    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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