If you receive a new business or investment property in exchange for old like-kind business or investment property as part of a tax-deferred 1031 exchange, your holding period begins on the day after the date the original (or old) property was acquired. This is because your basis in the new property is augmented by the deferred gains from your old property.
Remember, only real estate that you intend to use for Investment or for use in a trade or business qualifies for 1031 tax deferred treatment. The two main areas to be careful of are:
Personal Use
If you use real property for personal use such as your personal residence or vacation home, it may not qualify because it is not used for a qualified purpose (investment or business).
Dealer Property held Primarily for Sale
If you hold property as inventory or as your stock in trade it may not qualify for 1031. Ask yourself how frequently you sell residential lots or convert buildings to condominiums and sell the units, as part of your business. If you are doing enough of this type of activity, you may be a dealer and the real estate may be considered to be inventory. Flippers and rehabbers beware.
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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