1031 exchange to save taxes

7 Replies

If you are 1031 exchanging, you can do it at any time, subject to the identification rules of 1031. If you are living in it and want to avoid the capital gains tax that way, you need to live in the house as your primary residence for 2 of the last 5 years. 

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@Dan Hawker , You need to hold that property long enough to demonstrate that your intent in purchasing it was to hold for productive investment use (not simply to resell).  Most folks fell comfortable at anything more than a year.  But there could be individual circumstances where a hold period of less than that might be appropriate.  There is no specific holding period.  Only what it takes to establish your intent.

@Dave Foster, I purchased a property in March of this year and did a complete tear out and rehab. It is complete and move in ready and is under contract to close on 8 December. There was never any intent for this property other than to rehab and resell. It was never listed as a rental and was never occupied after the renovation was complete. Does this qualify for demonstratng the intent?

 Part two of this is how do I show what I spent on the rehab? Are the receipts and invoices that I will use for my accountant going to suffice for this?

Thanks in advance and I certainly appreciate all the information you have provided in the forums on the 1031 Exchange. 

@Dan Hawker , Thanks for the shout out.  Unfortunately it does demonstrate your intent was primarily to resell.  Since that was the case it wouldn't qualify for 1031 treatment.

There's a reasonableness standard for calculating those expenses.  Bring in the shoe box full of receipts let your accountant have a ball.  Bonus points for doing it April 13 and making them cry :).

@Dave Foster , thanks for the answer, lesson learned for the next time.

For now, I’m using QuickBooks online. I scan my receipts and upload them to my account. I send an invitation to my accountant and he can have access to everything I have uploaded over the past year. I grant access on 10 April, he still cries.