Bifurcation: the best of both worlds Some real estate transactions benefit from section 1031 of the tax code because it's used in a business. Others properties benefit from the section 121 exclusion because it exempts gain on the sale of their personal residence. Still others benefit from neither, but you might be sitting on property that maximizes the benefits of … BOTH!

It's accomplished using a procedure called 'bifurcation,' which means splitting something into two parts. That something, for our purposes, is property sold as part of a business AND as a residence, and would otherwise be taxed without this strategy.

Among other types of real estate: duplexes and apartments, farms, businesses with a residence attached, homes with an office attached, to name a few, are properties that can be bifurcated for tax purposes.

It's a very useful (and more important: legal) strategy you may have the right to utilize but are not taking advantage of. To learn more on how this works, read Gary Gorman's article, Bifurcating a 1031 Exchange - Cutting an exchange transaction into separate parts at 1031Articles.com.

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