1031 Exchange On Owned Property And On Sale Under 1 Year
Long Subject Title I know.....I have a question for anyone out there that may know about 1031 tax deferred exchanges. My situation is this.
1. I will own 2 lots in Florida in the next 2 weeks. Both will have some financing against them.
2. I want to sell one of the lots quickly for a reasonable profit and apply the proceeds to the second lot which I will have already purchased.
I don't want to get hammered on taxes with this sale because it will be treated as income due to the short holding period.
Question:
Will this situation work for a 1031 tax deferred exchange where I could put the proceeds from the one lot in a 1031 holder and apply them to the second? My two concerns are:
a. I will already own the property in which I will be apply the 1031 profit proceeds.
b. The sale of the property in which I plan to make a profit will be held under a year.
Do either of these items matter in a 1031 exchange? Any advice is appreciated.
Thanks!
Dave
check these IRS links out
http://www.irs.gov/faqs/faq-kw2.html
http://www.irs.gov/irb/2003-33_IRB/ar11.html
and
http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html
As far as I know for your primary residence to qualify for a 1031 you have to lived there for at least 2 of the last 5 years.
maybe someone with some real 1031 experience can provide some insight???
Hi Dave,
Your proposed structure will not qualify for 1031exchange treatment. In order to qualify for like kind exchange treatment you must sell a real property interest in rental or investment property and buy a replacement real property interest in rental or investment property. Applying the funds from the sale of the first real property to a second property that you already own will not qualify as like kind replacement property. The second issue to keep in mind is that you must have the INTENT to HOLD the property you are selling and the property you will be buying as rental or investment property. If you acquire a property with the intent to sell quickly then you do not have the INTENT to HOLD and would not qualify for 1031 exchange treatment.
Thanks alot for the information. I appreciate your insight.
For your income tax questions, you would have gotten a much quicker response if you had posted your questions in the Tax Strategies Forum.