Use of property purchased using 1031 funds

[Bob Willis]

Hey All - I currently live in Nebraska. I own a couple of properties in Arizona that were purchased using 1031 funds and are being used as rentals (one LTR, one STR). I have held both for a number of years. My wife and I are in the process of moving to Arizona. We are trying to figure out our options relative to where we live once down there. Can we move into one of the houses that was purchased using 1031 funds? Or can those only be used as rentals? If we can use one of the properties to live in, if we stay there for two years can we take advantage of the tax benefits of owner occupied dwelling if we do then sell? I have looked in the forums for the answer to this question, but have not found anything.

[Dave Foster]

@Bob Willis If you have owned them and operated them as rental properties for a number of years then you are probably safe to go ahead and convert them to a personal residence. All the IRS is concerned with is your intent when purchasing the properties with 1031 funds. You have clearly demonstrated that your intent when you bought it was to use it for investment. The conversion of property from investment use to personal use (and vice versa) is not a taxable event.