1031 exchange questions

[Wiliam Rose]

Hello everyone,

I am considering building a SFR for the purpose of selling for profit. Rather than have to pay taxes on the proceeds, I would much rather roll that money into an apartment, utilizing a 1031 if I can.

Is this something that can be done? I believe that 1031's don't apply to your primary residence and also do not apply to house flipping.  Any experienced advice on the subject would be greatly appreciated.

William

[Rob Beland]

You will have to have owned the property for investment for at least two years to qualify for a 1031. A 1031 exchange defers the payment of capital gains taxes. When you flip a house you are essentially a house dealer. The income you earn is treated the same as a car dealer's income. Its not taxed as a capital gain. You're out of luck. Build it and rent it for a couple years and you can complete an exchange.