1031 Exchange Alternatives For Building?

[Jeremy Williams]

Hello Everyone,

I have a property i purchased way back in 2012 that is in Florida. It's had a decent run for me with good cash flows but I'm looking at making some moves here in California where I own the rest of my real estate and live. A recent change here has allowed me to build a 3rd stand alone unit on a lot my duplex is on. I was looking for a way to get the equity from the property in Florida into my new build without a tax consequence but it looks like the 1031 exchange would only be for the purchase or build of a property on a newly purchased parcel, not one I own.

Anyone have any ideas on good ways to reduce the tax burden for the $90-100k I'll be receiving on my Florida sale?

[Dave Foster]

@Jeremy Williams, good suggestion by @Kyle Kadish. And to @Jermaine Chad Ingram's point that is the problem.  Florida is a tax free state buy CA will take every bit of their tax on the sale so write off about 30% of your profit right there.

You're right, the 1031 won't work for that directly.  But as Kyle said you could access the equity in FL to build and not have a taxable event.  Or you could try for a twofer - Sell FL and 1031 into a property in CA so you consolidate your portfolio.  Then refi that property as high as you can and use the cash to build the 3rd unit.  You're only exposed to leverage risk on the one your refi.  But you've indefinitely deferred a large tax bill.  And if the numbers and stars aligned you'd actually end up with an additional income producing unit to your stable.