When you 1031 exchange into a property, you need to intend on using that property for investment or business use in order for the exchange to be valid. But what if you want to move into the property yourself at some point in the future? In this article, we are going to talk about the importance of having the right initial intent with your 1031 exchange and some considerations when moving into a 1031 property.
Consider Your Initial Intent
In any 1031 exchange, when you initially acquire a property your intent must be to hold it for investment or business purposes (lease it out, put it into a rental program, or otherwise hold it for business purposes). That being said, your long-term intentions when buying a property may be indeterminate. When you buy a property with the intent of renting it, you may not know if you’re going to continue renting it ten years down the line.
But it’s extremely important to the success of your 1031 exchange that when initially purchasing the property, your intent is for qualified use (investment or business purposes). You want to make sure that you walk like a duck and talk like a duck so that the IRS perceives you to be a duck.
We have seen clients get audited after moving into a 1031 exchange property. Make sure everything you do is above board and that you can prove that the property was used for investment or business for a substantial time before you even think about moving into the property and using it for personal use.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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