OP has a property they live in but rent out part. They want to do a 1031 exchange. I presume they can, on the portion of the property they rent out, as they do with deducting expenses.
But I haven't been able to find any specific guidance on this, either on the IRS website or in the regulations. Any thoughts?
Thanks.
What are they going to exchange into? To the extent they plan to live in (part of) the new property, it won't qualify. By the time they get done with the exchange, they may not have avoided any tax and incurred unnecessary brain damage.
A couple of potential scenarios:
The current property is a duplex. They live on one side and rent the other. That might work for an exchange. Bifurcate the sale by allocating (based on sq ft?) and then exchange the rental side for a new rental with debt. Everything works.
The current property has an ADU (adjacent dwelling unit). The ADU has a footprint of 10% of the total. Exchange is probably NOT going to work. Even if it did, the taxes avoided are probably not worth the work.
bc snipped-for-privacy@ix.netcom.com> wrote in news: snipped-for-privacy@4ax.com:
Thanks Bruce. That makes sense.
Have something to add? Share your thoughts — no account required.
Ask the community — no account required