DEAR BOB: We would like to trade the equity in our home for some land that we think will go up rapidly in value over the next few years. The owner is willing to trade for our house. If we do this, will we owe any tax on our profit of about $35,000. Scott E., Arlington.

DEAR SCOTT: Yes. Such a trade would be taxable. The reason it can't qualify for a tax-deferred exchange using Internal Revenue Code section 1031 is that you would be trading "unlike properties."

A trade of a personal residence for investment property is not a "like-kind exchange," as required by the law.

However, if you move out of your home and rent it to tenants before trading it, you thereby convert your personal residence to investment property. Then you can make a tax-deferred exchange of it for the land since both properties are then "like kind." Check with your tax advisor to be sure such an exchange will meet the other tax-deferral requirements.

DEAR BOB: We have an option to buy a lot on which we would like to build our home. My husband is very handy and could do most of the construction work himself. But we are having trouble getting a mortgage loan. None of the local savings and loan associations or banks will lend to us. They say they won't make a loan unless we hire a general contractor. Isn't this illegal? What should we do? Henrietta A., Vienna, Va.

DEAR HENRIETTA: The reason many mortgage lenders refuse to loan to do-it-yourself home builders is so many problems arise on such projects that the risk is too great for the lender. Even professional builders run into unexpected construction problems. But amateur home builders are even worse, so many lenders have a policy of not loaning to self-constructors. Such a plan policy is not illegal.

If you shop carefully for construction bids, you should be able to find a reputable builder who will build your home at close to what you could do it for yourself. And it will be much faster. Since business is slow now for most home builders, today is an excellent time to get bids on your new home.

DEAR BOB: My wife and I have decided to get a "friendly divorce." We agreed to split everything equally, including the sale proceeds from our house. aMy question is if I buy another home, probably a condominium, do I have to pay any tax on the sale of our present house? My ex-wife will probably not be buying a house with her share of the profits. Richard M., Potomac.

DEAR RICHARD: Good news. You and your wife can each use the "residence replacement rule" of Internal Revenue Code section 1034 to defer profit tax on the sale. To qualify, you must buy a replacement principal residence within 18 months before or after the sale which costs more than your share of the sales price of your former primary residence.

For example, suppose your old home sells for $100,000 and you divide the proceeds equally. As long as you buy a replacement principal residence costing more than your $50,000 share, you must defer paying tax on your share of the sale profits. If your wife doesn't buy a qualifying replacement principal residence, she will owe tax on her profit share even if you defer tax on your share. Your tax advisor can give you more details.