1031 Transfer question.

[Jerry W.]

This is a question for experts like @Dave Foster, I have someone interested in trading a property I have for another property straight across.  Mine is a nicer property but much smaller.  I suspect the difference in value would be as much as $40K,  in my favor, but if fixed up it's value would climb rapidly.  I believe I can do a straight trade and not trigger any taxable event, but then do I need to hold the property I just got, for another 1 year period before I can sell it and do a 1031 for cash?

[Dave Foster]

@Jerry W., It is possible to swap properties and perform basically a diy 1031.  If you and the other party agree on equal valuation it becomes an issue for your accountant to simply transfer the schedules to the new property.  Your real question is how long do you have to hold that new property before selling and doing another 1031.

No statutory answer on that one.  Your intent in acquiring that new property has to be to hold for productive investment use.  I think most folks would feel comfortable at anything more than a year.  But there could always be unique reasons why a hold period of less than (or more than) a year would be appropriate.

You just want to make sure your obvious intent isn't to acquire this property simply to fix up and sell.  Even though it's the result of a 1031 that' makes it just a fix n flip.  And you'd actually lose your long term capital gains from the old property.