1031 Exchange Form; When and how to apply it?

4 Replies

@Roberto Vasquez , A 1031 exchange is an entire process that involves the use of an unrelated 3rd party called the qualified intermediary whose sole job is to document the sale and purchase transactions and to hold the funds inbetween.  So for the 1031 itself there is a bunch of documentation.  It is consolidated by your accountant who uses that documentation to file the form 8824 with your annual tax filing. That is the form that talks directly to the IRS.

But you got a bigger issue - It sounds like this property you have intended to fix and flip.  That does not qualify for 1031 treatment.  Properties that qualify for 1031 exchanges are properties you purchase with the intent of holding for productive use.  There is no statutory holding period.  But most folks feel comfortable with anything more than a year unless there are mitigating circumstances that could demonstrate that your original intent was to hold.

Hi Dave, 

Looks more complicated than I thought. My intentions is to flip the house as soon as possible, and I thought that selling the house and use the money to reinvest it will be enough to avoid capital gains. Thank you for your response. I will look into it. 

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Originally posted by @Roberto Vasquez :

Hi Dave, 

Looks more complicated than I thought. My intentions is to flip the house as soon as possible, and I thought that selling the house and use the money to reinvest it will be enough to avoid capital gains. Thank you for your response. I will look into it. 

It’s taxed as ordinary income, plus ss/med self employment tax....not eligible for a 1031 or cap gains.