quick tax question re: like-kind exchanges... anybody out there seen this? so if I sell a house that I've lived in for 3 months and built as an investment (total holding period is 13 months) and 1031 that into another house that I then live in with the intent of making it my permanent residence, can I qualify for 1031 treatment on the gain? Second, if so, will that gain then be subject to the primary residence exclusion from long term capital gains if I live in the second house 2 out of the next 5 years?
it's an investment property though -- I can clearly demonstrate that. The fact that I parked my family in it for 3 months shouldn't change that unless there is some specific Treasury Regulation. Your point is duly noted though, I will search that out. My hunch is the problem may be in flipping it into a house that I intend to be my residence, then it isn't property held for investment (thus, not "like-kind"). If that is a problem, then what I may do is sell, deposit the cash in escrow (in accordance with the 1031 guidelines) and use the taxable portion to purchase an investment property and the return of basis to purchase the new residence. Just thinking out loud...
The acquired property must be investment property at the time of acquisition, without a present intent to convert it to personal use at a later time. The Link
thanks and very much appreciated. That's what I was afraid of (and apparently too lazy to look up). Now I just have to figure out if I can segregate my return of basis for the dp on the new house and use the taxable gain in a 1031 for another investment property.
I don't have the focus to think this through, but if you are trading from a residence to another residence, you have the same essential tax deferral--and eventually forgiveness, up to a high limit, right?--as a 1031 would give you, don't you?
like-kind exchange requires investment property to investment property of like-kind. The current house is investment property, I am confident of that. The second one is not really investment property, and we now know that's an issue. My confusion was the interplay between 1031 and the exclusion from income for capital gains from the sale of a primary residence if you've lived in it 2 out of the last 5 years. The reality being that just because you haven't met the 2/5 exclusion doesn't mean the property isn't your primary residence. In this case, there is no intent on the first house, there is clear intent on the second. Unless I am missing a rule that let's me tack on the holding period from the first to the second and defer that gain, then I think I'm subject to tax, unless my plan B works. I've worked on fairly complex commercial 1031 deals, but this is a bit different. So while I know something about it, I really am just shooting from the hip. I'll let this thread play out, then I'll call my accountant and let them confirm I'm out of luck for a healthy hourly fee.
