Can I 1031 my raw land and build a duplex to sell?

[Michael C berry jr]

My raw land is closing in the next 3-6 months in Florida. I have a potential partner with 2 vacant lots in Colorado outside of Steamboat Springs. We want to roll my 1031 money into building a duplex or SFH on each of his lots to sell. Is this possible or do we have to own and rent them out?

[Bill B.]

It’s an investment. So you’re ok that the land isn’t producing rent. 

But…you have to spend all your net proceeds. So the land has to cost as much as your sales, not the land plus the building costs, because you won’t get that don’t within the deadlines…

Then…you can’t build to sell. That’s a job, building homes to sell, not an investment. So you’d have to build the duplexes and then rent them out. Yes, you could “eventually” sell them. But then the 1031 didn’t do you much good because you’d owe taxes on both sales when you sold unless you did another 1031. The taxes don’t go away when you do a 1031, they get rolled in to your next deal.  

Reach out to @Dave Foster for an expert’s opinion.