Can I use 1031 exchange on a new build house

[Kyle Crouch]

I’m selling a house this month that I owe nothing on and I would like to use that money to build a new house on some land that I own. Can I avoid paying capital gains tax some how?

[Dave Foster]

@Kyle Crouch, because you already own the land you cannot exchange for any subsequent improvements on that land.

You could exchange into a new build where a builder owns a lot and is building a house on it.  As long as you can take title to it within 180 days from when you close the sale of your old property.

Or you could do a Reverse Construction exchange where the QI takes title to the lot (before you do) and then the builder builds on it.  Again you only have 180 days from when the QI takes title to the lot to get your exchange done.

New construction is hard to make work with a 1031 unless you are purchasing a property from a builder that will be complete is a fairly short time.