1031 Exchanged into a house and another parcel of land

[Gregory Vajda]

Hi all,

We are about to close on our replacement property which happens to be a single family home with an adjoining piece of land (Separate Lot).  The price of the deal is 729K and I would think just the house and lot it is sitting on would appraise at that.  The adjoining lot is valued at around 200K, could I sell the land and do another 1031 or since it wasn't another "investment" would I simply have to pay capital gains tax on it? I've tried searching the internet but haven't had any luck in figuring out the best way to navigate this.  

[Dave Foster]

@Gregory Vajda The key to 1031s is your intent. You have to feel comfortable that you can demonstrate your intent was to use the property for investment. It might be hard to prove that if you turn around and sell the adjoining lot without holding it. Most people feel comfortable selling after holding their properties for at least a year. You may just want to think about holding onto it while you decide what to do, that way other opportunities might come up along the way.