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  • 1031 for Partial Rental

    From Stuart O. Bronstein@21:1/5 to All on Fri Jun 14 16:34:25 2024
    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.

    --
    Stu
    http://DownToEarthLawyer.com

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  • From bc@21:1/5 to [email protected] on Sun Jun 16 17:39:43 2024
    On Fri, 14 Jun 2024 16:34:25 EDT, "Stuart O. Bronstein"
    <[email protected]> wrote:

    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.

    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.
    --
    Bruce Cantor, CPA, JD
    Admitted in Colorado

    --
    << ------------------------------------------------------- >>
    << 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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    * Origin: fsxNet Usenet Gateway (21:1/5)
  • From Stuart O. Bronstein@21:1/5 to [email protected] on Sun Jun 16 20:17:36 2024
    bc <[email protected]> wrote in news:[email protected]:

    On Fri, 14 Jun 2024 16:34:25 EDT, "Stuart O. Bronstein" <[email protected]> wrote:

    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.

    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.

    Thanks Bruce. That makes sense.

    --
    Stu
    http://DownToEarthLawyer.com

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << ------------------------------------------------------- >>

    --- SoupGate-Win32 v1.05
    * Origin: fsxNet Usenet Gateway (21:1/5)