1031 Exchange

[April A.]

The time is finally here. I am ready to sell my primary residence, a duplex and purchase 5 or more units. I am considering doing a 1031 Exchange but I was wondering if all of my equity has to be used towards the new purchase? I am wondering because I will have to show atleast 3 months reserve cash for the loan. I wanted to use my equity for the cash reserves also. Or, do I just structure the cash amount I need to retain into the deal? I hope that makes sense.

[Bill Exeter]

The portion of the duplex that represents her primary residence would fall under Section 121 of the Internal Revenue Code and she would qualify for the $250,000/$500,000 tax free exclusion and the portion of the duplex that represents rental property would fall under Section 1031 of the Internal Revenue Code (1031 Exchange). 

The 1031 Exchange reinvestment requirements would only pertain to the portion of net sale price, net equity and taxable gain allocated to the rental property portion.