Can a 1031 exchange be used on a flipped property. See scenario below.
Buy a multii family property for 200k, fix it for an additional 30k, and seel for 280k.
Can the capital gains be used to buy a single family property? Defer tax payments?
in general, the answer to your question is “no”. “flipped” properties are generally not eligible to be exchanged for 2 reasons. First, the property must be held as an “investment” and in the eyes of the IRS, flipped properties appears to be purchased with the intent to resell. Secondly, there is a general rule of thumb that an exchnaged proerty should be held for at least 12 months. This is not defined in the statute, but rather generally consider a mininum length of time to establish intent to hold as an investment. The best and cleanest way would be to purchase the property, rehab it, get it rented up, have at least 1 years worth of SchE (rental activity) and then sell during the 2nd year. Sorry for the vague answer but there is not black and white rules on some aspects of the exchange.
As for the property type, yes it can be a single family home. However, it can NOT be your primary residence. You need to establish your intent to hold as an investment for at least one year. If later you want to move into it, that’s OK as it would be consdiered a conversion to a primary residence.
One final note is with an exchange, you do the exchnage and then file your taxes. If the IRS comes back and challenges the exchange, the burden will be on you to provide documentation on issues such as intent. This is where a good exchange accomadator can provide value to prevent you from creating an exchange that is later determined to be invalid.