Question: 1031 exchange

[JP Krueger]

Can you like-kind exchange a 3 family the owner is living in to a 2 family that the owner will live in?

[Glenna Wood]

Yes, you can exchange those property types but the kicker is you live in it. A 1031 exchange is intended to carry capital gains forward on investment property and the $250/$500k primary home sale exclusion is for your residence (one unit in your case).  Your situation mixes the two. A 1031 may be possible but applying the rules is much more complicated regarding your rental vs residence basis, past use of each unit, etc. As an investor who has used simple 1031's for rental property exchanges, I wouldn't proceed without a thorough professional review and you will need a pretty specific profile of property you want to exchange into in order to plan out the whole transaction soup to nuts. You don't want to ding up that primary residence exclusion. IMHO as a small investor, it's the best tax break we have.