Posted by William L Exeter on July 21, 2003 at 23:44:44:
The basic requirement is that the relinquished and replacement properties be held for investment, income production (rental) or use in a business. If you have held the vacant land as investment property, then it has certainly met the qualified use test, and real property is like kind as to other real property, including vacant land for vacant land. It appears in your comments that you have have held the relinquished property as rental property, so it has met the qualified use test. You can certainly sell off a portion of the property in a 1031 exchange and acquire vacant land else where as your replacement property. I’m not sure what you mean by build a home on. You must have the INTENT to hold the property for a qualified use. If you intend to hold the lot as an investment, to build a home and rent it out, those will both work. But, if you intend to build a home on the lot to live in you have converted your replacement property into something other than a qualified use and it would therefore be disallowed as a 1031 exchange. Assuming that you have the INTENT to continue to use the property under the qualified use quidelines, you can certainly structure the 1031 exchange as a build-to-suit 1031 exchange so that you can acquire the vacant lot and construct improvements on it. This get much more involved, so if you need more information on build-to-suit 1031 exchange transactions, email me.
Diversified Exchange Corporation.