1031 exchange requirements

3 Replies

Hello BP community!!

I've been reading into the 1031 exchange and was curious about a requirement someone was trying to explain to me.

I was told if you complete a 1031 exchange you must rent out the property for xx amount of years, then live it in as a primary residence for xx of years ?

After reading up on it, I can’t seem to find this requirement anywhere. Was wondering if anyone has completed one or have heard this being a thing ?

Look forward to the responses, Thanks in advance!

Sebastian

@Sebastian Madariaga

You're mixing together two completely different ideas. One is selling your own home, where you live now. After you lived there for 2 years, you can basically sell it tax free, with some restrictions.

The other is selling a rental property which you rented to other people. If it grew in value significantly during this time, you might owe large capital gains taxes when you sell. 1031 exchange is a way to delay paying these taxes. Generally, you're expected to rent it for longer than a year before you exchange, however it is not a firm rule, only a suggestion.

@Sebastian Madariaga,The only minimum required hold period in section 1031 is a "related party" exchange where the required hold is a minimum of two years.In preparation for your exchange, contact an exchange facilitation company. You can obtain the names of facilitators from the internet, attorneys, CPAs, escrow companies or real estate agents. Facilitators should not be acting as "agents" as well as facilitators. Escrow companies, attorneys, real estate agents, etc. are agents and should not be used as facilitators. For more information on 1031 exchange procedures, you can speak to an advisor or inbox me