Land sale , capital gains question

[Lee H.]

I’ve got a piece of land I’m looking at selling. I have roughly 100k into it and sale price would be roughly 250k. I’m looking for some ideas on how i could go about saving some on the capital gains tax.  I don’t believe I can 1031 it, as I have never rented over the three years that I’ve owned it. The only thing I’ve done to the property is clean it up. 

Question 1- am I correct thinking this is not a sale I could 1031 exchange?

Question 2- could I split the sale over two years to help?

Question 3- I do plan on reinvesting my gains do I have any other options?

Thanks,  any info appreciated 

[Michael Plaks]

Quote from @Lee H.:

I’ve got a piece of land I’m looking at selling. I have roughly 100k into it and sale price would be roughly 250k. I’m looking for some ideas on how i could go about saving some on the capital gains tax.  I don’t believe I can 1031 it, as I have never rented over the three years that I’ve owned it. The only thing I’ve done to the property is clean it up. 

Question 1- am I correct thinking this is not a sale I could 1031 exchange?

Question 2- could I split the sale over two years to help?

Question 3- I do plan on reinvesting my gains do I have any other options?

Q1 - incorrect. Unimproved land does qualify for a 1031 exchange. And you can exchange into other types of real estate, including residential and commercial buildings or completely passive investments in other people's funds. Does not have to be another piece of land.

Q2 - you could split between two years, but remember that you will have a risk of the second payment not coming through and the deal collapsing. 

Q3 - you have two main options: a 1031 exchange and an Opportunity Zone Fund. Reinvesting by itself does not affect your capital gain taxes.

Questions you did not ask but needed to

Q4 - Before considering tax savings strategies, you need to evaluate how much tax impact you are likely to have form this potential sale, given your entire tax situation.

Q5 - New tax opportunities in the Trump's Big Beautiful Bill might make it attractive for some investors to sell for cash and pay capital gains. Need to explore it.