Residential Building Lot
I purchased a residential building lot 18 months ago with the intent to build a new home on the lot for my primary residence. We have completed the plans are ready to pull the buliding permit next week. Today I recieved an unsolicited off on the lot for nearly 3 times the original cost.
We are considering our options and need some help understanding the tax implications. We have found several other buliding lots in the area that could also work for us. Some of these lots cost less than the current offer on my lot. We would like to sell the current lot and build our new home on one of these less expensive lot.
Do I need to do some sort of 1031 exchange on the lot to avoid capital gains taxes?
Any help would be appreciated.
Thanks
I just backed out of a 1031 exchange yesterday decided to take the money but anyway email me and I will get you the # of the Exchange Service that I was about to use. It is avery large company working in several states and they will answer your questions or google 1031 Exchange and many will pop up with Phone #
Lyn
Remember that a 1031 exchange is for like-kind property that is for investment purposes not your primary residence (Section 121 exclusion rules may apply).
There are special regulations that must be taken into account.
The major problem I see is that if the land is considered investment property you would have to wait five years after the exchange to use it as your primary residence. This I am certain of.
The reason I mentioned Section 121 above is because you should speak with your tax advisor regarding the ability to have your property considered for the capital gains exclusion. If you can negotiate with the buyer to hold off for another 5 months the whole gain would be tax free under Section 121. You may want to go ahead and pull those permits either way because the IRS uses a "facts-and-circumstances" test and if you had intention of building and living there then you may have a chance.
As I said, I strongly recommend to speak with a competent tax advisor.