All Forum Posts by: Lucy Bennet

Just looking for some answers I'm having trouble finding. I'm selling a rental property, capital gains will be about $130000. This property was purchased 4 years ago with a previous 1031 exchange. Basically about downpayment at closing table. I realize I must get advice from my CPA but he is out of town this week and just need some general advice as I'm on a time crunch.

Moving into primary residence with a carriage house (CH will be used only as a rental- I will never live there). The 1031 X company has told me I can use the $130,000 towards the carriage house portion of the purchase and first must contact my CPA to write up a document saying how the PP of the entire new property will be split up as primary and investment property and 1031 x portion will only go towards CH.

So far, so good. My lender has also told me that although they will not allow a 1031 ex to be used towards a purchase on a primary residence(as we all know those are the rules), he also told me that they will NOT see the 1031 X docs and after funds for closing have been verified, they will not care where the funds to close are coming from. (ie, they don't care if it is coming from a 1031 exchange company or from my own bank). I will have enough to cover the 20% down without using the 1031 x funds.

Here is where I can't seem to get any direction on: PP for new residence is $655,000 and down payment is 20% ($130000). If I go the route of the 1031 X, then at the closing table, will I need to send in the $130,000 from the 1031 Ex ONLY???? as it will count as my entire downpayment since the bank doesn't see where that money is coming from? OR do you think I will need to send in $130,000 from the 1031 X and then an additional $130,000 towards the primary residence downpayment?

It seems easy enough as I write it out, but no one is giving me a definite YES or NO and if I'm going to have to cough up an additional $130,000 in addition to the $130,000 1031 x then I need to know for sure before I set all this up. Can anyone help?

Thanks for everyone's responses! I appreciate it.

I'm trying to save on taxes but wondering if this method is correct. Can someone help?

I have rehabbed and sold House A in April 2020 and House B in May 2020. I have purchased 2 more houses (House C and House D). Have completed rehab on C but it is still on the market and has not sold yet. I'm still working on completing rehab for D. House C and D will be sold in 2021. So all rehab costs of all 4 houses were paid in 2020 but only A and B were sold in 2020. 

When I do my taxes, since I am set up as an LLC and all 4 properties were purchased under my LLC, do I have to match up my expenses with each house? OR can I report a loss because I have only sold 2 houses but have purchased and rehabbed 4 in 2020. In essence, can I spread out my expenses for all 4 houses thus reducing my reported profits to show a break even or a loss even though I made a profit for A and B? Instead of paying the hefty 25% (or so) taxes on a profit of $20k for house A, I would now show only a profit of $5k for House A and pay the taxes on $5k instead of $20K because I have spread out my expenses from C and D to include A and B.

I hope this makes sense. Any advice would be helpful. I don't want to do anything illegal but I will use any legal loophole that is available.