1031 question

I was told by a realtor that I had to keep my property for at least 1 year before I could 1031.

Is that true?

If not, could somebody tell me the requirements.


There is no specific minimum holding period. The requirement is that the relinquished property be held for a qualified investment or business use, and that the replacement property also be held for a qualified investment or business use.

Property you exchange quickly after acquisition may appear to the IRS to be intended as flip property and therefore not eligible to participate in a 1031 exchange. Therefore, to establish that your property was acquired for an investment or business use, you need to actually hold the property for a qualified investment or business use for some period of time – the longer the better.

Bill Exeter, who is a professional 1031 facilitator and a frequent contributer to this forum, suggests a one year holding period is sufficient to establish your intent.

An exchange is still permitted with a shorter holding period as long as you can show that some business consideration prompted the quick exchange rather than simple tax avoidance.

Dave T is right on the money.

Is there any reason why you would want to do a 1031 in under a year? ???

I thought 27.5 years after depreciating all you could was best, if it was in your best interest to hold a property that long.

I have exchanged marginal producing property for property that would improve my cash flow. I have exchanged property that had experienced a very steep appreciation curve in a short period of time to capture all of my profit for reinvestment instead of just the after tax profit.

At a point in time, well before 27.5 years, the return on equity diminishes to something less than the short term CD rate at your local bank. If your equity is only generating a 1% or 2% return every year, an exchange from one property into multiple properties could improve your investment returns.

I have already exchanged one property last year, and will exchange another this year. Both are located in a neighborhood that is within shouting distance of a proposed site for a brand new low income housing project. Exchanging now will hedge my equity against a future decline in property values should the housing project have an adverse impact on the nearby neighborhood.