1031 replacement property on lot next to personal residence?

[Carl Schreiner]

Hello.   I'm new to this forum and there seem to be some very knowlegable folks here!

We are in the process of moving from Oregon to Idaho and have a complicated potential 1031 situation. We are selling our vacation rental in Welches, OR for $870K and we bought it for $346K. We have a $200K mortgage. We are going to rent out our personal home outside Portland, OR and buy a new house in Idaho. One of the properties we are looking at is actually two adjacent lots. The house sits on one 2 acre lot and the other 2 acre lot has a large shop with an appt in it. The vacation rental we are selling is owned by a single member LLC that is treated as a disregarded entity on our taxes. Would it be possible for us to purchase the house lot personally and have our LLC that owns our vacation rental purchase the lot with the shop/apartment through a 1031 exchange? The apartment would need some work but we would like to fix it up and Airbnb it so it would technically be a like kind property, but we would also store our RV in the shop. I know your personal residence can't be on the same property as the replacement property, but what about next door? If I'm understanding the exchange rules, we would need to purchase that lot separately for at least $523K to maximize the tax benefits and would we need to finance around $200K. The morgage requirement is the part I'm having trouble understanding. Paying around $500K for that lot and $900K for the house lot actually would be in the ballpark of how it could be split up, but I"m not sure how a bank would look at that. I know the cleaner way to do it would be to use the 1031 to buy another rental property and buy our house separately, but that's not going to be possible in the market we are looking at. This house just happened to be spit up into two lot coincidentally so I thought I'd ask around.

It's too bad we can't use the 1031 funds to pay down our mortgage in Portland since we are converting it to a rental and will put it under its own LLC. I'm guessing there is no way that could be structured that's not self-dealing;). Tell me if i'm wrong! We have a lot of moving parts in this transition, so any ideas are welcome!

Carl S.

[Jerry W.]

@Carl Schreiner, I second what @Chris Davidson said.  I would absolutely contact @Dave Foster.  He helped me on 2 different 1031s in the last year clear out in WY.  Figure it out BEFORE you sell.