All Forum Posts by: Cody Sims

Thanks for that shout out @Natalie Bender. @Cody Sims, your dad has some good options. If he also lives on the ranch then a certain % of that property could be allocated as his primary residence. When sold the percentage of profit allocated to the primary residence should be able to come to him tax free (the first $250K of profit if single or $500K if married. And then the remaining percentage could be used in a 1031 exchange.

Replacement property for the sale can be any type of investment property anywhere in the US or Guam, the US Virgin Islands, or the Northern Marianas Islands. And it can be any number of replacement properties. As long as he purchases at least as much as the investment allocation from the sale. And uses all of the proceeds allocated to the investment portion he will defer all tax. So going from a ranch to MF of any type is perfectly fine.

In this scenario it would be possible for him to sell the ranch and take $250K or $500K of profit tax free. And 1031 into one or more replacement properties. And if one of the properties was a MF he may be able to immediately move into one of those units if the valuations for replacement are met.

Some tax free. The rest tax deferred. And a new place to live for free. That's a pretty good scenario.

Wow! This is great information. Thanks David and Natalie for the response! Yes my dad does live at the property so the 500k would be a possibility for him and would be fantastic. So, since this is a ranch that he sells hunts under his LLC, the ranch can count toward being an investment property as well as a primary residence? I know the 1031 can only be used on investment properties but this is a unique property with it being a hunting ranch used as residence and business.

The other question I'd have is MF the only option here? Or could he purchase 4-5 single family residences for 300k a piece? Maybe new construction from a builder who is willing to sell 5 houses under one closing? Not sure if that's possible. Thanks!

0 Votes

Greenville, South Carolina

Hello, my father is selling a ranch that he owns for 4 million and looking to downsize and purchase a lake property for about 1 million. So, this is putting him in the position to have to look at the possibility of doing a 1031 exchange on the 2.5 - 3.0 million that would otherwise be taxed at capital gain rates (he wants to avoid paying Uncle Sam at all costs). After looking into this a bit it seems like there is a rule of purchasing a "like" property to what was held? Is that so? Does that limit the purchase he could make? Ideally, he would roll the 2-3 million into a multifamily property to hold and cash flow from for retirement. The other questions would be is it possible to purchase multiple properties from the 2-3 million? Or does it have to be a single purchase?

Any insight from a tax pro and specifically someone who has gone through a 1031 exchange would be greatly appreciated!

1 Vote

Greenville, South Carolina

All Forum Posts by: Cody Sims

Cody Sims has started 1 posts and replied 2 times.

Post: Family Selling Ranch - How to avoid paying taxes on capital gains?

Post: Family Selling Ranch - How to avoid paying taxes on capital gains?