selling rental home that was once our primary residence...1031 question

kangcoach

LoanSafe Member
#1
Hello,
We have a home that we purchased in 2005. We resided in that home until 2013. From 2013 to present it has been rented. We are now going to sell it. Do we have to reinvest the entire profit into a 1031 exchange or just a percentage based on how many years we resided in the home vs. rented it?
We do not want to pay the IRS the hefty tax but want to use a large amount of our proceeds to purchase another primary residence. We were not able to sell earlier as the 2nd mortgage had been sold off and nobody contacted us to let us know who held it. We hired an attorney and it was finally located and we have settled with them, freeing up the property to be sold. We have been trying to get this figured out since 2012 and held hostage not being able to sell!!
Thank you!!
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
#2
From my understanding it has to be the entire amount if you want to avoid taxes. I'm confirming this with someone I just completed a 1031 exchange with and will let you know what they say.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
#3
Both my borrower & agent are almost positive you have to use the whole amount. When doing the 1031 you have to purchase a home that is the same or higher in value from the one you're are selling. I'm sure you know that, I have a phone call out to the person who handled our last 1031 exchange and will keep you updated with the response.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
#4
I did get the answer directly from a company that I know who handles 1031 exchanges and here is what they told me:

When performing a 1031 exchange the IRS is just going to be looking strictly at the sales price and make sure that it's higher as I mentioned above.

In regards to a percentage if you have owned the property a certain number of years - no, you have to invest the entire amount outside of the non-recurring costs which would include fees like commission to agents, title and escrow costs as well as lender fees. Those fees can be exempt and would not be a taxable liability.

Hope this answers your question.