Can a 1031 exchange and a primary home exclusion be combined to maximize tax savings?
A taxpayer has several options available to maximize tax savings when combining a 1031 exchange and a primary home exclusion. The first option is when a taxpayer has two separate structures used concurrently, such as a Duplex, whereby, part of the property is used for business or investment and the other part is the taxpayer’s primary residence. Since the usage of the property is clearly defined and distinguishable between personal and business use, the taxpayer can apply the primary home exclusion to the portion lived in and complete a 1031 exchange on the business portion. The second option is available for a single structure used concurrently, such as, a Boarding house. Since the usage is not clearly definable, the taxpayer would first apply the primary home exclusion to the entire gain and complete a 1031 exchange for the balance of the gain. The third option is available when a single structure is used consecutively, such as, when a principal residence is converted to a business o
