Kevin K. asked:


If I own a home and want to rent it, how many years do i have to rent it to have a 1031 exchange for income property?

Jennifer

2 Responses to “1031 Exchange ?”

1. Costa Financial on August 14th, 2010 4:13 pm

   There is no absolute answer to that question in the tax code. The vague answer is that you need to rent it long enough to show intent to hold in the event of an audit. The IRS does not want to see intention to resell right after the purchase. Most tax advisers will say that one year is sufficient because you will then have a tax return showing that property as investment. Any paper trail you have to show intent to hold helps, rental contracts, advertisements looking for tenants etc. If in doubt you could talk to a tax adviser. has some good information regarding this question.

2. www.JRealEstate.blogspot.com on August 16th, 2010 8:58 pm

   You say that you own a home and want to rent it?

   My question to you is how long have you owned and lived in it as your personal residence?

   I ask you this because if you lived in it for 2 years (dont have to be consecutive years) with in the last 5 years, you may be able to take advantage of Sec 121 Exclusion. This will give you $250K-$500K of money in your pocket with paying a dime on taxes.

   If Sec 121 does not apply to you, then in order to be eligible for Sec 1031 exchange, I suggest you rent it for 1yr after you lived in it to show intent to the IRS that you are holding it as an investment since your will be exchanging it with another investment.

   Here is the website of the 1031 Exchange company we normally use.

   Ligal disclaimer: Any tax information, I have given you is only my educated opinion and not an expert advice.