Living in a 1031 exchange
I have completed a 1031 exchange and now discover that the new property has many shortcomings that will take a while to set right. Can an owner live on the property whilst completeing renovations and repairs?
wscook
I would not recommend it, because if the IRS audits you, they will argue that your exchange did not qualify under Section 1031 because it was not property held for investment or in a trade or business. Rather, it was your principal residence.
While I understand you might be saying right now "but I am fixing it up as an investment," an investment property is not a principal residence under the Internal Revenue Code.
I would recommend that you fix the property up as quickly as possible and then rent the property for at least 1 year (preferrably 3 years if you want to be absolutely sure the IRS cannot disqualify your 1031 exhange) before renting the property.
Hope that helps,
Taxjunkie
No, living in the property will convert it from income producing/investment property to personal use and will therefore be disallowed as non-like kind property.
[addsig]
just a curious add on to the question, What if it were a multi-family property, 2 or more units, and he lived in 1?