Hello BP! I’m new to 1031 exchanges and (fairly) new to BP.
Is it possible to sell a single family residence (bought in 2010, rented since 2017) and 1031 exchange into (one or more) limited partnership(s) that own Multifamily (assuming it’s equal or greater value)? Thank you!
@Ryan Houck , That won't work because the 1031 exchange is only applicable for the sale of actual investment real estate followed by the purchase of actual investment real estate. What you're proposing is to sell investment property but purchase membership interest in an entity that owns investment real estate - not actual real estate.
But . I think things might be better for you. If you actually lived in that property until 2017 then you would be eligible to use the primary residence exclusion and take the first $250K ($500K if married) of profit tax free. You will still pay a little tax on depreciation recapture but will not have to use a 1031. So you can then invest in the syndications just fine.
I agree, Dave's advice is spot on. For a 1031 Exchange, it has to be a sale of investment real estate followed by a purchase of investment property. 1031 Exchanges involve a trade of real properties that are the same in nature or character, even if they have different qualities. So, for example, two lots of the same approximate size, value, and location could be exchanged under Section 2031 even if one was improved and the other unimproved.
Thanks, Dave and Ahmed. That’s exactly the guidance I was seeking. Much appreciated!