Time period after conversion before doing a 1031 Exchnage

Forum|Forum|2 years ago
September 23, 2023
2 replies
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Client lived in property owned as principal residence for 20+ years with her daughter. Her daughter (age 22) died of a heart attack in the property in July of 2022. Client moved in with her son in another city July 31st, 2022. Property was rented out starting August 1st 2022. Client is considering selling the property and purchasing 2 rental properties via a 1031 Exchange. Her basis in the subject property is approximately 300k and selling price is estimated to be 1.1 million. How long should she hold the property as an investment in order to do a valid 1031 Exchange?

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Best answer by Terry53029

I don't believe there is a restriction on the time as a rental, but you don't want the IRS to think you are just "flipping" rentals. I believe most experts in the field recommend you have it as a rental for 1 to 2 years

T

Terry53029

Answer

Intuit Community Champion

I don't believe there is a restriction on the time as a rental, but you don't want the IRS to think you are just "flipping" rentals. I believe most experts in the field recommend you have it as a rental for 1 to 2 years

BobKamman

Level 15

The 2-year rule applies to how long an acquired property should be rented before conversion to a primary residence. Under the "facts and circumstances" here, I don't see any restriction on starting the exchange tomorrow. The interesting question is whether she can (or must) use the Section121 exclusion as well as the Section 1031 deferral.

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