Wondering how IRS tax code Section 121 and 1031 impact home sales with business use? Find all the information you need below.

Section 121 exclusion applies first and then the Section 1031 deferral is applied. 

Section 1031 is a valuable tax planning and strategizing tool that can be used for a variety of situations provided care is taken to make sure the qualification rules are carefully followed. However, in your planning, be sure you keep in mind that Section 1031 provides tax deferral and not tax forgiveness. The “tax-free” moniker frequently associated with Sec 1031 exchanges is misleading to taxpayers, and you, as a tax practitioner, must remind your clients of that fact.