Agent

Homeowners eye real estate exchange, hit legal hurdle

How long must home be rented before qualifying?
Published on Sep 26, 2006

DEAR BOB: My wife and I plan to use our home equity to purchase an investment property. We wanted to do an Internal Revenue Code 1031 tax-deferred exchange, but I recently discovered we can't do such an exchange with our personal residence. So we now are thinking of moving out of our primary residence and renting it for a while so we can later do an IRC 1031 exchange. How long must we rent the house before exchanging it to defer the tax? --Gincy H. DEAR GINCY: The IRC 1031 statute and regulations don't specify any minimum rental time after converting your personal residence into rental property before it can qualify for a tax-deferred exchange. Purchase Bob Bruss reports online. Most tax advisers suggest renting your former home at least six to 12 months (to show rental intent) before making an IRC 1031 tax-deferred exchange. However, if you and your wife have less than a $500,000 capital gain in your personal residence, why not just make an Internal Revenue Code 121 tax-exempt sale? W...

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