Can a 1031 Deferred Exchange take place where there is mixed property?
Taxpayers hold properties for various reasons: • Investment • Productive use in their trade or business • Primarily for sale • Personal use. Properties held for the first two reasons qualify for IRC Section 1031 Tax-Deferred Exchange treatment. These properties may be real or personal. Sometimes Exchange Parties hold a mix of real and personal properties. In these situations, tax and legal advice is necessary to allocate sale and purchase prices to the appropriate real versus personal elements of the transaction. In Sayre vs. U.S., 163 F Supp 495, the court ruled that any reasonable allocation would be appropriate. An allocation could be determined by an appraisal, the number of units, or the relative square footage of the units. Example A: The Exchange Party relinquishes the family homestead and the surrounding ranch, a mix of personal use and business use. He can take advantage of the new Principal Residence Capital Gains exclusion (subject to specific limitations), while simultaneou
