One of the most common concerns that investors come up with is: 'can I exchange my primary residence using a 1031 exchange?' Maybe not everyone, but certainly some can. But can you? If you ask IRS, you'll get a direct No. However, as it happens under the Internal Revenue Code, there are exceptions. Let's consider a situation: what if after some time you choose to convert your primary residence into a rental property? Here's the answer. If you turn your primary home into a rental property (i.e., you rent it to tenants who get the possession, and you no longer use the property as your primary residence), you may be able to do a 1031 exchange on that property. Although the IRS doesn’t clearly state how long you must hold the property for rental purposes, the majority of tax professionals believe that one to two years should be enough, given you can show the property is used for investment purposes. The IRS has clear views on the following two points:
Certainly, you may not be able to do a 1031 exchange on your primary residence. However, if you convert your primary residence into a rental property and hold onto it for some time, you are good to go for a 1031 exchange. Therefore, while rules (those established by the IRS) can't be broken, bringing the exceptions into light can transform your investment portfolio. Discuss your 1031 exchange questions, concerns, and requirements here, call us at 888-993-2835.
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October 2019
Commercial Real Estate |