How to Use a 1031 Exchange to Sell Real Estate

How do you use a 1031 Exchange to sell real estate? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• Is the Section 1031 option applicable on personal-use property in case the same property is sold less than two years of use by the owner? This option is not applicable to personal-use property (primary residence or second home) unless it is converted into some type of investment or rental property
• Who would you get a 1031 Exchange from when getting ready to sell property? If you are planning to do a 1031 Exchange, you need to start talking to a qualified intermediary before starting the sale
• I have a second home in my personal name in a different state. It has appreciated. If I sell the property, how would it be taxed? The entire gain would be capital gain - there’s no 121 exclusion, no 1031 (unless made a rental property first); gain will be taxed at the federal level and the state it is in and in which you reside

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Resources:

Entity Formation

https://andersonadvisors.com/entity_formation/

Self-employment Tax

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

Section 121 - Capital Gains Exclusion

https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

1031 Exchange

https://www.irs.gov/pub/irs-news/fs-08-18.pdf

Toby Mathis

http://tobymathis.com/about-toby-mathis/

Anderson Advisors

https://andersonadvisors.com/

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