Hello I am hoping that someone can help me out here.
I sold my primary residence last year and have been renting, I used the proceeds from the sale to buy a vacant lot and now I am changing directions and selling it, it closed today.
My question is this: will I have to pay taxes on this even though the money used to buy the land was tax free and I am selling at the same price I bought it for? If so is there any way to get around it like a 1031 exchange or something?
This will essentially make it look like I made twice my regular yearly income and I am worried what the taxes will look like,
@Levi Kruse , vacant land does qualify for 1031 treatment as long as you have not started construction which would make appear to be builder inventory.
It sounds like you purchased it to hold as an investment while you evaluated and now after a year you are deciding to sell. In that case a 1031 would be appropriate. You can sell that land and use the proceeds in a 1031 to purchase any other kind of investment property.
Hi @Levi Kruse ,
You probably have no taxable gain since you are selling the land at the same price that you bought it for, so you would likely not need to even consider structuring a 1031 Exchange transaction. However, if you had taxable gain on the sale of the vacant land you would be able to structure a 1031 Exchange transaction.
The second issue is that the sale of your land has already closed, which means it would be too late at this point to structure a 1031 Exchange transaction. 1031 Exchanges must be set up prior to any property closing.
Yes, using your "tax free" money from your home is irrelevant. It's too late to do a 1031, and if you are "breaking even" there's no taxable income anyway....what's the question?
Thank you for the replys, seems I was worried about nothing here. Even though I dont need a 1031 at this point the information was very helpful and will be usefull moving forward. Thank you for the helpful explanations.
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