1031 Exchange - Time Property Held
Imagine I sell a property intending to do a 1034k deferred exchange, and then dont like the available choices. I buy something I dont like to meet the 45/180 day requirements. Do I have to hold that second property some specified time before I can do a 1031 exchange to someting I do like?
There is no specific holding time for the replacement property in a 1031 exchange. There is a requirement that the replacement property be used for an investment purpose (such as production of income).
Place the replacement property into service as a rental, then when you find another property more to your liking, initiate another 1031 exchange.
Please re-check the IRS 1031 requirements for hold period. I will look up my documents and re-post.
As I remember there is a 2 year hold period to avoid a capital gain hit on the first leg of the exchange.
JBW
[addsig]
The two-year holding and investment use period only applies to the relinquished property in a 1031 exchange when it is sold to a related party.
If you find something different, please let us know.
First I am no CPA and I am not an Attorney, however my quick initial research indicates that the IRS would look at the “Intent” of the Taxpayer. If the Taxpayer were determined to “Hold the property primarly for sale”. Then this could disallow the deferment of tax.
Like with any Legal or Tax issue the law looks at Intent. i.e The exchanger’s handling of property as a Dealer could be viewed as an intent to “Hold the property primarily for sale”.
The key message here is be careful with the IRS and 1031 exchanges. Check with your RE attorney and/or CPA
It’s getting late so I will gather more data and get back with specifics as I find them.
JBW
[addsig]
You are correct. That is why I said in my first response that There is a requirement that the replacement property be used for an investment purpose (such as production of income).
If the property is actually placed in service for a qualified investment use, then we would be very hard pressed to prove that the taxpayer's intent was to hold the property primarily for sale.