1031 exchange rental properties for land to be developed

[Brian Fournier]

Hi folks,

I am thinking about a strategy to sell my 3 triplex rental properties and then by a tract of land to develop.  I would like to do a 1031 exchange.  The land would be a large parcel that I would subdivide into house lots and sell them individually or build spec houses on them.  My question is how would I calculate the basis for each individual lot that is carved out of the original tract of land?

[Jay Hinrichs]

U will want to talk with your tax advisor/cpa  when you create lots and spec homes these become inventory and then your taxed at ordinary income.. so not sure doing a 1031 into the land other than short term help will help you in the long run..

Might be better to sell the houses pay the capital gain.. then buy the land..   tax would be cheaper than ordinary income

but again check with your people on this.