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New tax law affects rental real estate

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DEAR BOB: In a recent response to a reader, you said Congress enacted legislation effective Oct. 22, 2004, affecting rental property acquired in an Internal Revenue Code 1031 tax-deferred exchange. Does this apply to all such property, or just to rental property acquired after that date? – Harry S. DEAR HARRY: The amendment to Internal Revenue Code 121 affects a rental property, later converted into a principal residence, and sold after Oct. 22, 2004. The date of property acquisition in a tax-deferred exchange doesn't matter. Purchase Bob Bruss reports online. Thousands of savvy realty investors have sold their rental properties, such as apartments, commercial property, or a business property, and made IRC 1031 tax-deferred exchanges for single-family residences of equal or greater cost and equity. To qualify for the IRC 1031 exchange, the acquired property must be held for investment or business purchases. After renting the house for a reasonable time, perhaps six to 12 months,...