Ask an expert - 1031 rule applies in certain cases | Orlando Sentinel
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1031 rule applies in certain cases
Posted November 5, 2006
Q: I own a lot, which I plan to sell in 2007. I wish to avoid paying capital gains, so I'm planning to buy a villa or condo, in a 1031 Like-Kind Exchange.
I plan to occupy the villa/condo two to three months of the year and rent it out the rest of the year. It will not be my primary residence.
With this scenario, could I qualify for a 1031 exchange?
G.L., The Villages
A: Taxpayers must have held the property for use in a trade or business or for investment. Personal residences do not qualify for a section 1031 exchange.
Vacation homes may qualify as investment property if the taxpayer's personal use is limited or the home is rented.
The Internal Revenue Service states that a dwelling is considered a personal home if, during the tax year, you use it for personal purposes for more than the greater of: 14 days or 10 percent of the total days it is rented to others at a fair rental price...
Ask an expert
1031 rule applies in certain cases
Posted November 5, 2006
Q: I own a lot, which I plan to sell in 2007. I wish to avoid paying capital gains, so I'm planning to buy a villa or condo, in a 1031 Like-Kind Exchange.
I plan to occupy the villa/condo two to three months of the year and rent it out the rest of the year. It will not be my primary residence.
With this scenario, could I qualify for a 1031 exchange?
G.L., The Villages
A: Taxpayers must have held the property for use in a trade or business or for investment. Personal residences do not qualify for a section 1031 exchange.
Vacation homes may qualify as investment property if the taxpayer's personal use is limited or the home is rented.
The Internal Revenue Service states that a dwelling is considered a personal home if, during the tax year, you use it for personal purposes for more than the greater of: 14 days or 10 percent of the total days it is rented to others at a fair rental price...
posted by Patrick Leblanc at 8:24 AM
1 Comments:
I would like to utilize a 1031 exchange to avoid capital gains on the sale of a rental property, will call it A. Additionally, I have a primary residence, will call it B, that I would consider converting to a rental.
Can I swap B for A with myself where the primary, B, converts to a rental and is considered to be the exchange of like kind under a 1031 exchange?
This would free up the original rental property, A, to sell avoiding capital gains? and using the proceeds to purchase a new primary residence, C. In the end I will still have a primary residence, C and a rental B.
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