Bought with long term intent, but things changed...

[Jon Klaus]

I bought a single tenant commercial building in June of 2015.  I planned to hold long term.  The month to month tenant just moved out last month, so I've been marketing to find another tenant and have some good possibilities.  

I just received an unsolicited offer to sell the building.  I'm thinking of negotiating the sale.  It will probably be less than a one year hold if I'm successful.   Can the transaction qualify for a 1031 exchange?  Or long term capital gains tax treatment, given the original intent?

[Dave Foster]

@Jon Klaus, you're not going to get cap gains treatment unless you push the closing past that one year mark.  a 1031 exchange is not technically bound by a holding period.  If your intent when you bought it was to hold for productive use then it is qualified property and you can 1031 it.

You'll want to make sure that you have your documentation and demonstration of intent ready if audited.   But in theory yes you should be able to 1031 that. This will straddle two tax years and that's another situation that will work to your advantage reporting wise and is a phrase that tax courts have used in the past to describe a valid exchange.