1031 investment property and rent primary residence?

Question

I will be selling my property with two homes on it- one has been my primary residence and the other a rental. I would like to take what will be approximately 1/2 of the sale profits (those attributed to the rental home) and do a 1031 exchange with a new home that I will then rent out.

I hope to then rent a place of my own in another town.

Would this be alright? Thanks in advance!

I hope to then rent a place of my own in another town.

Would this be alright? Thanks in advance!

Dave Foster · Answer

@Henley H., Nope, although it certainly could be asked as a question in a field audit. But that's easy enough to answer with a copy of your lease.

But your personal living situation is not a concern as long as you're not living in the house you 1031d into.

Henley H. · Answer

Thanks so much! To clarify, it won't raise flags if I myself am renting a property as my primary residence, while renting the 1031 new purchase out to someone else?

Dave Foster · Answer

@Henley H., Yes that would be a split use property. Providing you've lived in the other half for two out of the previous 5 years that half will be tax free. The 1031 will tax defer the other half.

1031 investment property and rent primary residence?

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