Partial 1031 Exchange

[Daniel Rogers]

I’m expecting an offer on a former primary residence that we are renting out. We paid $173k in 2012, expecting an offer of $280k. Because we are active duty military, my understanding is that since we lived in it 2+ of the last 15 years (+10 years for active duty military), the appreciation will not be taxable.

We are about to submit an offer on a duplex, and I’d like to use a 1031 exchange to avoid depreciation recapture but not use the 1031 for what should be tax-free depreciation. I know partial 1031 exchanges are a thing, but I don’t know if it’s an administrative nightmare or high-risk to differentiate what is being deferred...if that makes sense...

Has anyone had experience with this, and is this something that I can easily do? I haven’t had time to get with a 1031 facilitator or my CPA, since this idea only sprung to mind this evening...

Thanks!