Investment or Business Properties Qualify for 1031 Exchange, But Be Careful with House Flips

One question a lot of taxpayers have when it comes to 1031 exchanges is “can I do a 1031 exchange on flipped property?” The short answer is no, but you there are other ways to structure your exchange in order to qualify.

Don’t Hold for Resale

You don’t want to be seen as holding primarily for “resale” because that will NOT qualify for 1031. The question becomes, are you holding the property for investment or business purposes or are you holding it for inventory for sale to the public?

The length of time a property is owned is but one of the many factors looked at to determine if you have held the relinquished property for the qualified purpose of investment or business purposes, as opposed to holding primarily for resale (flipping). One good year of rental is a good rule of thumb but the longer the better.

Having an unsolicited offer may be a good detail in this facts and circumstances analysis…if you go for a shorter hold period…but that’s perhaps more risky.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

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