I'm a co-owner of a home that burned down, and we're weighing our options on what to do with the insurance payout. Home was my grandfather's that he sold to a relative and myself. It wasn't a primary residence for either of us. On the same property is a hangar that we've previously considered turning into a wedding venue. Does anyone know if we could avoid taxes by using a 1031 exchange to put towards improving the hangar to turn it into a wedding venue?
Hi @Nate Pucel ,
The "natural disaster" or fire and receipt of the related proceeds would fall under Section 1033 of the Internal Revenue Code or a "1033 Exchange." The 1033 Exchange can provide you with a lot of planning opportunities, but is not as flexible as the 1031 Exchange when it comes to definitions of Like-Kind Property, etc. You should be able to qualify in some way under Section 1033, but more questions need to be asked. The 1031 Exchange would not come into play at this point in time because there was no sale of the property.
Thanks for the info!!