Profile picture for cliffslay

After a 1031 rental property exchang, is there a time frame for renting the newly acquired property?

If I'm currently renting-out a single family house and execute a 1031-exchange with the owner of a condo that was previously rented, how long am I obligated to attempt to rent the condo before I'm allowed to move into the condo and make it my primary residence?  
  • July 31 2014 - Washington
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Answers (2)

There never has been given a set time frame to hold the replacement property as an investment in completion of a 1031 exchange.  Most professionals in the business will give the answer of a year at least, and the longer the better.  That will season the property as an investment which is the key to qualifying the "like-kind" rule of the 1031.  Consult your tax preparer so you both have a comfort level of the correct course of action before converting the property to personal use.  Good luck!
  • September 05 2014
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Profile picture for wetdawgs
You need to talk with your tax accountant, and if your tax accountant is not extremely familiar with 1031 exchanges then find one who knows them inside out.  1031 exchanges alone are tricky, but it sounds like your proposing something even trickier so it would be very easy to trigger big penalties. 

http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031 
"You must report an exchange to the IRS on  Form 8824, Like-Kind Exchanges and  file it with your tax return for the year in which the exchange occurred."    "Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange."

If you are proposing this for tax avoidance, please rethink.   Taxes are deferred, not forgiven.

You can establish to the satisfaction of the IRS that neither the exchange nor the disposition had tax avoidance as one of
  • July 31 2014
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