Many taxpayers wonder how long they need to hold their replacement property in order to qualify for 1031 exchange treatment. In this article, we are going to discuss some important considerations when it comes to the 1031 exchange holding period requirement.
How Long is Long Enough to Satisfy the 1031 Exchange Holding Period Requirement?
You could ask four different people this question and you will get four different, potential correct answers. The real answer is - nobody really knows.
Let’s say you purchased a replacement property and you put it into an intermittent rental program (such as AirBnB). The question is – how long does the IRS scrutinize that property after you acquire it to ensure that you’re really using it for investment or business purposes? In the IRS’s own safe-harbor, they examine the two 12-month periods after you acquire the property. So if you extrapolate the two 12-month periods as the standard for rental pools, maybe it stands to reason that 18 months might be a little bit shy of that standard.
That being said, there is great diversity of opinion on this topic and reasonable people differ on what exactly constitutes an adequate holding period.
Like-Kind Exchanges of Real Estate
If you are looking to defer the capital gains taxes on the sale of real estate, a 1031 exchange might be right for you. Reach out to the qualified intermediaries at CPEC1031, LLC to learn more about the like-kind exchange process and how it may be beneficial to your situation. Our team can walk you through the ins and outs of the 1031 exchange process, making sure you have everything you need when it comes time to close on your transaction. Contact us today at our downtown Minneapolis office to learn more about our services and how we can help!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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