{"id":27291,"date":"2019-05-29T14:40:38","date_gmt":"2019-05-29T18:40:38","guid":{"rendered":"https:\/\/www.affiliated1031.com\/mixed-use-1031-exchanges-what-you-should-know\/"},"modified":"2023-04-03T16:01:25","modified_gmt":"2023-04-03T20:01:25","slug":"mixed-use-1031-exchanges-what-you-should-know","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/mixed-use-1031-exchanges-what-you-should-know\/","title":{"rendered":"Mixed-Use 1031 Exchanges \u2013 What You Should Know"},"content":{"rendered":"<div  class=\"tatsu-h6utrfq9uxgf7cme tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6utrfq9wn9g4o23\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6utrfq9xy4av8h4\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-video tatsu-youtube-wrap tatsu-BJnIg2dbn   \" ><div class=\"gdpr-alt-image  be-gdpr-consent-message\"><img decoding=\"async\" style=\"opacity:1;\" src=\"https:\/\/img.youtube.com\/vi\/42ttrDr3jUg\/maxresdefault.jpg\"\/><div class=\"gdpr-video-alternate-image-content\" >Your consent is required to display this content from  youtube - <a href=\"#gdpr-popup\" class=\"mobx privacy-settings\" data-type=\"HTML\" >Privacy Settings<\/a><\/div><\/div><\/div><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6utrfq9z57r8j7l  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6utrfq9z57r8j7l.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style>\n<p><strong>Invariably, when we give a seminar on <a title=\"Link to What is a 1031 Exchange\" href=\"https:\/\/www.affiliated1031.com\/es\/what-is-a-1031-exchange\/\" target=\"_blank\" rel=\"noopener noreferrer\">1031 exchanges<\/a>, a question on mixed-use 1031 exchanges is raised.<\/strong><\/p>\n<h2>What\u00a0is mixed-use?<\/h2>\n<p>If you had a farm and lived in the farmhouse but farmed the surrounding land, you would have a mixed-use property.\u00a0 The<strong> farmhouse would be your personal residence,<\/strong>\u00a0and the\u00a0<strong>surrounding farmland would be a property that you used in your trade or business<\/strong>\u00a0(in this case, farming) or was being held as an investment and could be used in a mixed-use 1031 Exchange transaction.<\/p>\n<p>In this scenario, you (the Taxpayer) could sell the property and use sections 121 and<strong> <a title=\"Link to 1031 Information on Wikipedia\" href=\"https:\/\/en.wikipedia.org\/wiki\/Internal_Revenue_Code_section_1031\" target=\"_blank\" rel=\"noopener noreferrer\">1031 of the Internal Revenue Code (IRC)<\/a>.<\/strong>\u00a0 How does that work, you ask?\u00a0\u00a0Under<strong> <a title=\"LInk to Home Sale Gain Exclusing on Journal of Accountancy\" href=\"https:\/\/www.journalofaccountancy.com\/issues\/2002\/oct\/thehomesalegainexclusion.html\" target=\"_blank\" rel=\"noopener noreferrer\">section 121 of the Internal Revenue Code(IRC<\/a><\/strong><a title=\"Link to Home Sale Gain Exclusing on Journal of Accountancy\" href=\"https:\/\/www.journalofaccountancy.com\/issues\/2002\/oct\/thehomesalegainexclusion.html\" target=\"_blank\" rel=\"noopener noreferrer\">)<\/a>, a taxpayer can sell their personal residence, and if they lived in the personal residence for two of the last five years, up to $250,000 of profit per person or up to $500,000 per married couple, can be received <strong>TAX-FREE<\/strong>.<\/p>\n<p>That, of course, is presuming that the personal residence (in this case, the farmhouse) went up that much in increased equity. <strong>The remaining portion of the sales price could be allocated to the farmland, which would qualify for a Section 1031 exchange.<\/strong><\/p>\n<p>\u00a0<\/p>\n<h2>A Mixed-use 1031 Exchange Example:<\/h2>\n<p>Mr. and Mrs. McDonald (the taxpayers) purchased a farm for $300,000 in 2001.\u00a0 It has a farmhouse on it and 50 acres of farmland.\u00a0 The farmhouse is valued at $200,000, and the land is valued at $100,000 (that, of course, equals $300,000).<\/p>\n<p>In 2023 they agree to sell the farmhouse and the 50 acres for $1,100,000.\u00a0 If they can justify the value of the farmhouse at $700,000, they could receive the profit on the farmhouse <strong>TAX-FREE\u00a0<\/strong>(sales price of farmhouse $700,000 less original purchase price of $200,000 equals a TAX-FREE PROFIT of $500,000 under IRC Section 121).<\/p>\n<p>The farmland, originally purchased for $100,000, is now worth $400,000, so there was a profit of $300,000 on the land.<\/p>\n<p>The taxpayer could transact an IRC Section 1031 exchange on the $400,000 of land and purchase another real estate investment for $400,000 or more.\u00a0 If taxpayers did that, they would defer any and all taxes due on the sale of the farmland (that, of course, is covered under IRC Section 1031) in this mixed-use 1031 exchange.<\/p>\n<p>It&#8217;s a convoluted example&#8211;<strong>but WOW<\/strong>&#8211;what a way to save money, pay no tax on the personal residence profit, and defer paying tax on all of the other profit.<\/p>\n<p>At Affiliated 1031, we always recommend that the taxpayer consults with their tax and\/or legal counsel on all matters dealing with the Internal Revenue Service.<\/p>\n<p>To learn more about how 1031 Exchanges can help investors defer capital gains taxes visit our page <a href=\"https:\/\/www.affiliated1031.com\/es\/what-is-a-1031-exchange\/\">Understanding 1031 Exchanges.<\/a> \u00a0Or call us today at 877.873.1031. We look forward to working with you. <!-- \/divi:paragraph --><\/p>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6utrfq9xy4av8h4.tatsu-column{width: 100%;}.tatsu-h6utrfq9xy4av8h4.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6utrfq9xy4av8h4 > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utrfq9xy4av8h4 > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utrfq9xy4av8h4 > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6utrfq9xy4av8h4 > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6utrfq9uxgf7cme .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6utrfq9uxgf7cme > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utrfq9uxgf7cme > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utrfq9uxgf7cme .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Pretend my last name is McDonald.\u00a0 Further, pretend that I am a farmer. AND on my farm&#8211;E- I, E- I &#8211; O, &#8211;ENOUGH of the nursery rhyme&#8211;but if I had a farm and I lived in the farmhouse but farmed the surrounding land, I would have a mixed-use property.\u00a0 The\u00a0farmhouse would be my personal residence\u00a0and the\u00a0surrounding farmland would be a property that I used in my trade or business\u00a0(in this case, farming) or was being held as an investment and could be used in a mixed-use 1031 Exchange transaction.<\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/mixed-use-1031-exchanges-what-you-should-know\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":26952,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[57],"tags":[],"class_list":["post-27291","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1031-exchange-basics-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27291","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27291"}],"version-history":[{"count":5,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27291\/revisions"}],"predecessor-version":[{"id":27477,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27291\/revisions\/27477"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media\/26952"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27291"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27291"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27291"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}