dual use property and 1031x
Dear 1031x: I have a small apartment building in D. The approximate
value is $650,000. I am considering the purchase of a 40 acre tract of land
which has a residence, a rental house, horse facilities, several
outbuildings, grazing land and 10 acres in ornamental trees. The trees will
be ready for market in 2 to 3 years. Income from the rental house and
grazing land is approximately $800.00 per month. I would like to do a 1031
exchange. The value of the replacement property is approximately $700,000.
The issue is that I would also like to move into the residence on the
replacement property. My calculations are that the residence and 8000
square feet of land surrounding the house is worth approximately $250,000.
The remaining assets are worth approximately $450,000. Before I go any
further and before I start drafting and signing contracts and engaging an
Intermediary I want to ensure that I can do a 1031 exchange. Can I
allocate a value to the residence and a value to the remaining property?
value is $650,000. I am considering the purchase of a 40 acre tract of land
which has a residence, a rental house, horse facilities, several
outbuildings, grazing land and 10 acres in ornamental trees. The trees will
be ready for market in 2 to 3 years. Income from the rental house and
grazing land is approximately $800.00 per month. I would like to do a 1031
exchange. The value of the replacement property is approximately $700,000.
The issue is that I would also like to move into the residence on the
replacement property. My calculations are that the residence and 8000
square feet of land surrounding the house is worth approximately $250,000.
The remaining assets are worth approximately $450,000. Before I go any
further and before I start drafting and signing contracts and engaging an
Intermediary I want to ensure that I can do a 1031 exchange. Can I
allocate a value to the residence and a value to the remaining property?
Dear Mr. L: Yes, you can buy dual use property in a1031x. In your example you would be trading investment property worth $650K for investment property worth $450K. You would owe tax on the difference $200K or on the amount of gain whichever is less. Is there anyway you can reasonably value the new home for less and the investment portion of the purchase for more? The more value you can place on the investment portion the lower your tax liability will be. Sincerely,
Steve Hickox
Attorney / President
1031x.com has grown to provide many services to our clients as Castle United!
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1031x.com, Inc.
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posted by 1031ExchangeBlog at
12:31 PM
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