Let’s say you sell all of your real estate assets and purchase a home in Florida that you then rent out for two years. After that two year period, you then move into that property and it becomes your primary residence. Is that an acceptable way to conduct a 1031 exchange?
The IRS has said in at least one ruling that holding a property for two years is sufficient time to make it eligible for 1031 exchange. In the IRS safe harbor that they have for analyzing rental pool properties they test each of the two 12-month periods after you acquire it to see if you have in fact been renting the property out.
Unfortunately, we have to infer a lot of this from private letter rulings. The IRS hides the ball and makes it difficult for taxpayers to play by the rules. They could give an objective bright-line rule that says 2 years is sufficient holding time but you can’t find that in the treasury regulations. Be sure to talk with a qualified intermediary about your situation to make sure you have all your bases covered.
Hire a Like-Kind Exchange Company
Hire a like-kind exchange company to help with your next 1031 exchange of real estate. Doing a like-kind exchange under section 1031 of the Internal Revenue Code can save you a bundle in capital gains taxes and keep your hard-earned money working for you in a continued investment. CPEC1031, LLC can act as the qualified intermediary for your exchange. We are a third party administrator that can safely handle your money and insulate you from receiving taxable boot during the like-kind exchange process. Contact us today to get started with your next 1031 exchange!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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