I recently purchased a foreclosure and have about 100K in equity in it. I also just signed a lease option to a tenant who made her first “rent” payment to me today. She will agree to purchase the property before her option to purchase actually takes effect, and is only on a lease option in order to help me achieve long term capital gains. I am interested in immediately doing a 1031 exchange on this property to another of a " like kind". My questions are this:
1)Do I have to rent to property to the tenant for a set period of time before I can legally do a 1031?
- If I do a 1031 how long do I have to rent the property to a tenant before I can move into the property and use it as a primary residence?
THANKS!
there is no “legal” requirment per se for the holding time as it is not defined in the 1031 code; however, it is generally accepted that one should hold for at least 1 year prior to selling. However, other factors such as whether real estate transaction are your primary sources of income can impact the determination of whether the 1031 is allowed or disallowed under the classification of “dealer status”.
The code is pretty clear that one must hold for investment purposes or use ina trade or business. Thus, quick flips fail to meet this test.
Yes, there is a new law on the books in '05 I htink about how much time msut elapse prior to converting to a primary residence. Sorry I don’t remember is exactly. I think it might be one year, but double check this.