Sold my house, need help with 1031 rules

7 Replies

Hi all, I have some questions about using the 1031 like kind exchange to avoid some of the taxes I could incur.

I closed on my first home a week ago.  I lived in that house as my primary residence for 15 years.  I have been using it as a complete rental for the past three years and rented a room in it for 10 or more.

I plan to use the proceeds to purchase a new property so I would like to use a 1031 exchange.  Unfortunately I may have already blown it.  I didn't use an intermediary at the time of purchase and the funds were deposited into my account.  Is there any way I can still use the 1031 exchange rules or do I just pay my taxes and buy a new place?

Also, if I do not purchase a new place, can I use the funds to pay down an existing rental property I own?

Any help or resources would be appreciated.  Thanks


Too late on this one. You have to have it set up ahead of time at closing so that all of the proceeds sit in the bank account of a qualified intermediary until you close on the new purchase. It has to go towards a new purchase as well and can't be used to pay down another debt.

Consider this as a lesson learned and move on. One still needs to pay tax and it is deferred until last day of owners life. Someone still has to pay tax for your eventually. 

You qualify for the 121 exclusion IF you sold it, and closed, within 3 years of the day you moved out....not a day more. 

In either case you’ll have dreoreciatiin recapture tax for the three years or so you rented it out. 

Also, if you're married the capital gains exclusion is $500,000

You can also add to it the cost of any work/rehab you performed on the home that improved or extended the life of the house (known as the adjusted cost basis). 

I didn't know about  this until maybe a month or two ago but I'll be using it in the future when I sell my primary residence here.