Can I 1031 Exchange in this Situation?

Question

BP Community,

I am in the military and am getting deployed soon.  As a result I am moving my family from Tucson back to ABQ, NM and into a property we currently own outright.  We had leased the property for the preceding 3 years.  My question is if I move my family back into the property for the duration of the deployment, can I still 1031 exchange it when we are ready to sell in the future or do I need to lease it out again prior to the exchange?

Thanks for any/all help...

CE

Clayton Crouse · Answer

You as well Dave, I reached out through BP and your website for add'l info.

Clayton Crouse · Answer

@Dave Foster and @Natalie Kolodij Thanks for the great advice guys.  Natalie, if you're up for it, I'd like to reach out and see if we can work together in the future.  You guys have a great week and thanks again for the advice!!!

Dave Foster · Answer

Hi @Clayton Crouse, You and @Natalie Kolodij are correct.  If it's your primary it's not eligible for 1031.  And to make it eligible for 1031 you would need to move out and turn it into an investment for a bit.

However it's going to be worth your while spending a few minutes with an accountant to go over your specific situation.  There are some waivers and exceptions to the primary residence exclusion for active military that may leave you eligible to take some if not all of the proceeds tax free.

By they way - a great accountant who knows real estate in and out just gave you some good guidance.  @Natalie Kolodij rocks!

Clayton Crouse · Answer

@Alex Deacon That's my number one priority this early in my REI career.  Building a team of specialists around me can alleviate a lot of problems and mitigate a lot of risk.  If I may ask?  What support specialists have you surrounded yourself thus far in your REI career? No need for me to reinvent the wheel when thousands of folks have already done it with success!

Alex Deacon · Answer

@Clayton Crouse Seek out good advisers. BP is a good framework for general information but you need a team of specialists to help you grow and succeed and keep out of any legal or Tax trouble.

Natalie Kolodij · Answer

@Clayton Crouse absolutely feel free to send me a PM

Clayton Crouse · Answer

@Natalie Kolodij Thanks.  I didn't want to assume and build that 1031 into my strategy, only to need to rebuild.  As a newbie I'm trying to allocate current assets into a plan to grow rapidly and trade up into Commercial Apartments.  Just want to plan appropriately. Thanks!

Clayton Crouse · Answer

@Alex Deacon Thanks for the reply.  Do you suggest working through a Real Estate Specific CPA or have you ever looked into the Wealth Strategist CPA's such as ProVision or FinanceCAPE?

Natalie Kolodij · Answer

I don't believe you'll be able to given that it was a primary home

@Dave Foster can confirm though

Alex Deacon · Answer

@Clayton Crouse thats a very complicated question and givin the strict regulations on these types of transactions you should rely heavily on a good CPA who know this sector of the business and the laws that go along with it.

Can I 1031 Exchange in this Situation?

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