Dealers cannot do 1031 exchanges on their inventory. If you buy a 40 acre swath of land and cut it up into smaller plots to sell to the public, you are a dealer. You’re selling your stock in trade even though it’s real estate. If you buy an apartment building and convert it to condos to sell to the public, then you’re selling your inventory. 1031 exchanges specifically exclude inventory from tax deferral. So you can’t do an exchange on your inventory. If you’re a dealer and you also own property for long-term investment or business purposes, you can do a 1031 exchange on those parcels that are not for sale. But it’s perhaps a better idea to segregate those assets into a different entity to keep it uncluttered.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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