For many who convert your main the home of a rental possessions (otherwise have fun with a portion of the dining room getting effective use in the a swap or business like in Rev. Proc. 2005-fourteen, instances step 36), brand new replace legislation significantly less than point 1031 and you will different of money regulations under point 121 may one another apply.

When your standards out of both parts 1031 and you will 121 try found, brand new part 121 different try used basic so you can know get; part 1031 next is applicable, plus people acquire attributable to decline write-offs. Anything obtained in exchange for this new rental house is taken under consideration just to the latest the amount the bucks exceeds the new part 121 excluded obtain on leasing property quit regarding the replace. That time until the replace which is pursuing the last go out the house or property was applied because a central residence is not believed nonqualified have fun with to possess purposes of the new proration laws out-of area 121. To work foundation of the property obtained about exchange (replacement assets), any obtain excluded significantly less than section 121 are put in their foundation of your own substitute for property, much like the treatment of approved get. You cannot move the fresh new replacement property so you're able to a central family instantaneously pursuing the change for every single section 1031(a)(1), and this makes it necessary that substitute for property getting kept possibly for funding, or effective use in a swap or business. 544.

For additional information in regards to the intersection regarding areas 121 and you may 1031, pick Rev. Proc. 2005-14, 2005-7 I.R.B. 528, offered at Take note, not, that one several months shortly after 2008 when the house or property is not used because the a principal home is, having specific exceptions, considered nonqualified use of one to assets which acquire allocable so you can like months may possibly not be excluded, in accordance with part 121(b)(5).