1031 Scenario - clarification

[Alex Todd]

Hi Folks - wanted to play out a scenario and see if how Im interpreting this is accurate...

- 1031 a rental property and follow rules for new investment (like kind, equal/greater value, price point, etc) 

- Rent for X time (to prove intent) 

- Move into same property and declare as primary residence at +24month mark to fulfill requirement 

Two questions :
- At the time of declaration, do you then pay Cap gains tax on original sale or are they still kicked down the road?
- Equal/ Greater value : Is this equal to sale price of original property OR the amount able to be reinvested off the sale of original prop?

Thanks in advance,

Alex

[Dave Foster]

Spot on @David M.. and @Wayne Brooks. @Alex Todd, The beauty of this plan is that there is no tax due when you convert it to your primary residence.  But you are probably selling a primary to move into this former rental.  And that primary could be a tax free sale!  Then as long as you live in the converted rental you'll pay no tax.  And then if you sell that converted rental after owning it for at least 5 years and living in it for at least two out of the five years prior to selling.  You'll get to take a proration of the gain tax free.  You don't get all the gain.  But you do get some of it tax free.  And then you can always move into the next one.  Good plan!!!