Reducing Capital Gains Question

[Patrick Melton]

I have a seller with a deal I want to purchase for development. Property is in Texas. Seller has homesteaded the property to taking large capital gains hit. Their two year homestead ends December 31 of this year. The property is zoned commercial so the 1031 might not be an option. Is there a more creative strategy like a Lease to buy or something?

[Dave Foster]

@Patrick Melton, Since this is their primary residence the 1031 exchange is not an option.  It is available only for properties being held for investment.

They would qualify for the sec 121 primary residence exclusion once they have lived in the property long enough that they can claim residency for 2 out of the 5 years immediately prior to sale.

You could certainly enter into an option and cooperation agreement with them that would allow you to pursue the entitlements/permitting you might need.  That could easily take several months.