1031 Proceeds Towards Development?
is it legal to use the money I receive from the sale of a duplex to put down on a loan to buy land and build a small apartment building? does this qualify as a 1031 exchange? thanks for the help.
robert
talk to your CPA or 1031 company for an accurate answer!
We just 1031 xchngd the proceeds from a 20k sqft. building into 5 acres of dirt on which a 49k sqft building is being built right now.
So the answer to your question is yes....so long as the trade satisfies the 1031 rules (i.e. 2yrs, investment property, etc)
More facts are needed to answer the question. Was the duplex a rental property or simply held as an investment? If you qualify for a 1031 exchange, you cannot take custody of the proceeds of the duplex....they must be held by a third party intermidiary. If you take cash out, you may be subject to tax on the amount taken.
Come back and post some more facts like, how was the duplex used (rented, did you live in 1/2, investment)? How long have you held the property?
Again,
talk to a 1031 exchange company to get correct and precise advise. I investigated extensively the logistics and laws regarding doing 1031 exchanges for short term ownership scenario. I found the laws somewhat vague in regards to required time frames of your ownership...get true advise from the 1031 exchange people.
You will technically not qualify for a 1031 exchange transaction. The IRS Regulations on 1031 exchanges are specific in that you must have the INTENT to HOLD the property for investment purposes. Holding the property for 30 days and then selling means that you really held it for sale and not investment. The part of the IRS Regulations that is vague is how do you demonstrate your intent to hold for investment in order to qualify for 1031 exchange treatment. The best way to demonstrate or prove your intent to hold property for investment is to do just that and hold the property for 12 months or more in order to qualify for 1031 exchange treatment. If you hold the property for less than 12 months, it does not mean that your 1031 exchange will automatically be disqualified but that it is more difficult to prove your intent to hold.
I would be happy to speak further with you about this, just send me an email or call.
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