Linking Two Real Estate Tax Shelters; Law Clarifies Strategy; You can stack personal residence exemption on top of a 1031 exchange.(FUNDS & PERSONAL FINANCE)

Byline: PAUL KATZEFF

A little-noticed provision of last October's American Jobs Creation Act clarified that you can combine two unrelated real estate tax shelters. That can lead to big tax savings.

But the law set up a strict time line for doing so.

Singles already could shelter up to $250,000 in capital gains on principal residences -- up to $500,000 for married couples filing jointly.

And with so-called 1031 like-kind exchanges, you could already shelter net profit on the sale of investment property.

Now you can clearly link the two strategies into a one-two punch.

The Jobs Act says that once you use a like-kind exchange to swap one investment property for another, you can eventually convert the second property to use as your main home. You can use the personal residence exemption at a later date on the second property.