Posted by John Merchant on December 04, 2004 at 11:46:50:
Rule of 1031 is any kind of RE for any kind of RE…doeen’t have to be same kind, just RE.
vacant land in a sec 1031 exchange - Posted by Adam
Posted by Adam on December 03, 2004 at 10:56:18:
Hi,
I own a 2 flat residential property that I rent out and have never lived in. Can I do a section 1031 exchange if the replacement property is vacant land held for investment? The vacant land is in a neighborhood in which the property is appreciating greatly. I plan to have an apartment building constructed on the land within the next year or two and then sell it for a gain. The amount of money I plan to use for the lot would be less than the proceeds I would have available from the sale of my building. I would use the additional proceeds to acquire a different investment property.
Thanks,
Adam
Re: vacant land in a sec 1031 exchange - Posted by William L. Exeter
Posted by William L. Exeter on December 05, 2004 at 20:51:30:
Yes, this does qualify. The only thing to keep in mind is that you are exchanging out of a depreciable property and into a non-depreciable property. Your capital gain would be tax deferred, but your depreciation recapture would be recognized. Your tax advisor can assist you with the exact calculation so that you know what you are looking at. Also, your INTENT must be to HOLD the property for rental or investment. If you intent is to buy, build and then sell it would techncially not qualify for 1031 exchange treatment. You would be holding your land for a period of time, and then the construction period would take some time, but the IRS would probably look to your intent as held for sale rather than held for investment. Speak to your tax advisor for more specific information.