Tuesday, July 10, 2007
Sometimes the Experts are Not
In the Mercury News Real Estate section this last weekend, a mailed in question was answered about selling a triplex that the owner lived in one unit. He wanted to sell his place and 1031 into a condo to live in. The "expert" completely disallowed any 1031 possibility because he lived in the property. This is not true depending on how he filed his taxes. He very well may have listed his 1/3 portion as his principal residence and the other 2/3 as investment property. Thereby allowing him to exchange his investment portion via the 1031 exchange. Could he exchange into a condo? Yes, though he cannot live there until he converts it to investment property, ideally at least after one year of renting it out. Then, he also would be allowed his capital gains exclusion for the 1/3 portion. From this, he could buy a condo and live in it right away. Let's talk to a CPA please.