Is there any tax advantage to buying a home with stock options?

Question

If I'm buying a home and want to exercise and sell some stock options to pay for part of it, is there something I can do to reduce the short term capital gain taxes? Specifically, does the 1031 exchange apply here?

Answer 1

It doesn't qualify for a section 1031 gain. They aren't like kind, in any stretch of the imagination, you would be trading paper for real property. There is no way that the gov't would allow you to defer the gain and then exclude it later.

Answer 2

The quick answer to your question is "No", you cannot do this through a 1031 Exchange. As a 1031 Accommodator with First American Exchange Company, one of the country's largest 1031 Accommodators, let me answer your question more fully.

The 1031 Exchange is a rather simple process. It allows an investor to sell an investment property and purchase replacement investment property and you can defer the capital gain liability. This is for Real Property only. Stock is not considered real property or "like-kind" property per the 1031 code. Per the 1031 Code, you must buy and sell "property held for productive use in a trade or business or for investment" (IRC section 1031(a)(1)). This means that you can buy and sell any type of real property held for these purposes. Sell a commercial building and purchase raw land. Sell a rental home and purchase a grocery store (the building and the land, not the business).

As an Accommodator registered in the State of Nevada, I help facilitate 1031 Exchanges in all 50 states. Nevada is the only state that requires registration of an Accommodator. In the other 49 states, anyone can become an Accommodator without bonding or any background checks. As an Accommodator with First American Exchange Company, a wholly-owned subsidiary of First American Title Company, your funds are guaranteed by First American Corporation, the largest title company in the industry, with a history dating back to 1889.

I hope this answers your question. If not, or if you have more questions, or if you would like more information, please contact me at [e-mail] or go to my company's website at www.firstexchange.com.

Answer 3

1031 exchanges only apply to "Like-Kind" property such as a rental home for a rental duplex.

No, it wouldn't apply in your situation. You will pay taxes on exercise of your options regardless of what you do with the money.....except for giving it all away. Buying a home, personal or rental, would not reduce the tax bite one bit.