Buying from my boyfriend on a 1031 exchange and then selling it back to him later?

Question

Is it possible to buy a house from my boyfriend on a 1031 exchange and then selling it back in a couple years to the same boyfriend?

Thank you

Dave Foster · Answer

@Mary Jay , this could work if a few things come together.

First, your boyfriend must not be a related party. As everyone said, this probably isn't an issue unless you are filing a joint tax return. Or are in business together in another capacity.

Second - He will be doing the 1031 exchange. So, he will need to find a replacement property to purchase when he sells to you.

Third - This would be best for you if you are going to live in the property as your primary residence. then when you sell back to him at two years you can take advantage of the primary residence exemption and get the first $250K of profit tax free. You might be able to sell it back to him at your cost. But after two years, it is highly likely that the IRS could look at the entire thing as a "step transaction". A step transation is basically a series of otherwise legal moves done in such as way as to avoid a tax. But when put together they make the IRS cry foul. This could disallow the 1031 exchange. It's not likely, but get your accountant involved in this from the get-go. The other option here is that you then do your own 1031 exchange when you sell back to him. If it is not being used as your primary.

Josh C. · Answer

What ai model do you use? I wonder if it's the same as @Kasing Ng or just AI models are spit out the same thing since you two said almost the same exact thing using same thing using such similar sentences. Actually curious.

Kasing Ng · Answer

Hi Mary, based on just what you have shared I can only speak in general terms, but a couple things stand out.

First, the related-party angle most people worry about probably isn't your issue. For 1031, "related party" means family (spouse, siblings, parents, children) or controlled entities. An unmarried partner isn't on that list, so that rule isn't what trips this up.

The real problem is the plan. A 1031 only works on property you genuinely hold for investment. If the intent from the start is to rent it a while and sell it back to the same person, the IRS can look straight through that prearranged round-trip and treat it as never qualifying. Writing the sale back to him into the plan is the weak point.

Two more things: you need a qualifying property of your own to exchange out of (a 1031 defers gain on something you're selling, it isn't just a way to buy his house), and selling it back in two years is its own taxable event unless you exchange again, so the tax moves rather than disappears.

With the facts as described, the sell-it-back part is where it breaks down. Worth running the specifics past a QI and a tax advisor before you commit. Happy to point you to what to ask.

Ashish Acharya · Answer

Mary, with the additional detail about renting the property for two years and then selling it back to your boyfriend, I’d be much more careful about how this is structured. There is an IRS safe harbor for a dwelling unit used as 1031 replacement property that generally requires you to own it for at least 24 months after the exchange and rent it at fair market rent for at least 14 days during each of the two 12-month periods, subject to the personal use limits.

But I would not look at the two year period as a simple rule that makes the transaction qualify. The IRS has indicated that whether replacement property is actually being held for investment depends on the taxpayer’s intent and the surrounding facts and circumstances. If the plan from the beginning is to acquire the property and eventually sell it back to the same person, that prearranged plan is something I would want a CPA and qualified intermediary to analyze before proceeding. The fact that your boyfriend is the seller also needs to be reviewed carefully under the specific related party rules. An unmarried boyfriend is not automatically a related person simply because of the relationship, but that does not eliminate the separate question of whether the replacement property was genuinely acquired and held for investment.

If this is something you are seriously considering, I would have the entire transaction reviewed before the 1031 exchange starts, including the purchase, rental period, intended holding period, and potential future sale. This is one of those situations where getting the tax structure right upfront is much better than trying to prove the transaction qualified after the fact.

Feel free to DM me, I’d be happy to send over a few 1031 and real estate tax planning resources that may be helpful.

Jason Malabute · Answer

The related-party rule is usually the first worry, but it covers family members and entities you control, and an unmarried partner generally isn't on that list. The bigger problem is the plan itself. A 1031 only works for property you're holding for investment, and buying with a prearranged plan to sell it back can get looked through by the IRS. You'd also need your own property to exchange out of, since a 1031 isn't a way to simply buy his house, and selling it back later is a taxable event unless you do another exchange, so the tax is delayed rather than erased. Run the specifics by a qualified intermediary and your own CPA or tax advisor before moving forward.

Mary Jay · Answer

My boyfriends house is sitting empty. I wanted to purchase it in a 1031 exchange and then rent it out and hold for 2 years and then sell it back to my boyfriend. Can I legally qualify for a 1031 exchange with a plan like that?

Buying from my boyfriend on a 1031 exchange and then selling it back to him later?

Buying from my boyfriend on a 1031 exchange and then selling it back to him later?

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