In general, you are not allowed to 1031 exchange property that is considered your primary residence. But why is that the case? In this article, we are going to explain why you can’t do a 1031 exchange of your primary residence – with a few examples to illustrate.
Primary Residence Examples
1031 exchanges only apply to property that is held for business or investment purposes. Your primary residence is excluded outright from 1031 treatment. Often, the best way to illustrate a particular 1031 exchange rule is through examples. Here are a couple examples of situations in which you would not be able to conduct a 1031 exchange of a primary residence:
- Moving. If you move from Minnesota to Wisconsin and you sell your home (your primary residence), you cannot exchange this primary residence for another new primary residence in Wisconsin.
- Getting Married. If you get married and move into your partner’s home, you cannot exchange your previous primary residence for a vacation property.
These are just a few examples that explain why you typically cannot exchange primary residences in a 1031 transaction. Section 1031 applies to property that is held for use in your trade or business.
Twin Cities 1031 Exchange Services
Considering a 1031 exchange of real property? Contact a skilled qualified intermediary today to discuss your options. Our Twin Cities 1031 exchange company has been assisting real estate investors with their 1031 exchanges for decades. Give us a call today with any questions about the 1031 exchange process, or to get your own exchange set up so you can realize the tax-saving benefits of a like-kind exchange.
- 1031 Hotline: If you have questions about 1031 exchanges of residential property, feel free to call me at 612-643-1031.
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