If I sell an investment property in hawaii, can i do a 1031 exchange and apply the capital gains towards another residential property i plan to.....

Asked by Jluciano87, 60618 Sat Nov 20, 2010

If I sell an investment property in hawaii, can i do a 1031 exchange and apply the capital gains towards another residential property i plan to purchase and avoid the capital gains taxes? I live in Chicago and also plan to sell my own home here but wondering if I can avoid capital gains from my investment property as well, and pay down as much as I can, if not pay off, my new residential property. Thanks in advance for any feedback.

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Ranj Mohip, Other Pro, Chicago, IL
Wed Jan 26, 2011
A 1031 exchange may be available to you, but the new property will have to be the same type of property as what you are selling ("like-kind"). It's possible to avoid a taxable consequence when your property in Chicago if certain requirements are met. Trulia is great for a lot of things, but a complicated tax issue is not one of those things. Speak with an accountant or attorney about this.

The information in this answer provided by Attorney Ranj Mohip is general information and is not intended as legal advice, nor does the attorney intend to create an attorney-client relationship with any reader by answering this question or otherwise contributing as a member of Trulia.com.
2 votes
Paulette Bez…, , Chicago, IL
Wed Jan 26, 2011
You have a very intelligent plan,but it is imperative that you consult several different professionals; your tax accountant, an attorney well versed in 1031 Exchanges, and a local realtor. Should you need a referral for Hawaii, I would be happy to give you one. If you're interested in selling your Chicago home, I'm a Broker Associate with Keller Williams Realty Lincoln Square and offer sellers a free, no obligation consultation that covers the home, it's condition, suggestions for repairs and/or staging, and a walk through "the process." Feel free to contact me if you wish to take advantage of the free consultation.

Paulette Bezazian
Keller Williams Lincoln Square
2156 West Montrose
Chicago, IL 60618
773-564-4280 (office)
773-550-4151 (cellular)
email:: paulettebezazian@gmail.com
0 votes
Anna M Brocco, Agent, Williston Park, NY
Wed Nov 24, 2010
When it comes to any tax related questions, it's in your best interest to consult with your tax professional and or tax attorney--he/she can best advise as it relates to your soecific situation.
0 votes
Jose Hernand…, Agent, Chicago, IL
Wed Nov 24, 2010
The current IRS rules require a taxpayer to hold the 1031 replacement property for at least five years and use it as an investment property for part of that time. You have two good options here, you can proceed with a 1031 exchange and keep the property as an investment for the next five years, and then use it as your primary residence( as long as there's some residential space). 2nd option- Combine an installment sale with a 1031 exchange, it's a little bit more tricky but it can be done I would need more time with you to explain this option.

feel free to contact me if you have any questions!

Jose Hernandez
Keller Williams, Gold Coast Realtors
0 votes
Bruce Ailion, Agent, Marietta, GA
Sat Nov 20, 2010
If done properly, you can sell an investment property in Hawaii and reinvest the proceeds in property deferring some or all the gain. To complete a 1031 exchange you will need an exchange intermediary and follow the strict rules. Many of the larger title companies service as intermediaries and can advise you as to the rules. If you use the funds from the sale of to pay down your new home, the cash would be considered boot and subject to taxation. My clients seeking this outcome will exchange for a stable rented property, ie, a Goodyear, CVS Starbucks, that has stable long term cash floow. This can be done in an exchange. A mortgage is taken out and the proceeds of that loan can be used to pay down your new residential property.

Good luck, this is an area were skilled professional advice is required.

Bruce Ailion,
RE/MAX Greater Atlanta
Certified Residential Specialist
Certified Real Estate Broker
Accredited Buyers Agent
MS Real Estate and Urban Affairs
Certified Distressed Property Expert
Certified Internet Professional
2050 Roswell Road
Marietta GA 30062
770-973-9700 Office
404-978-2281 Direct
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