How long after an exchange can a spouse transfer a replacement property (acquired to complete a 1031 exchange) to their spouse? Ideally, you want to wait 24 months after completing the exchange. The title-holding spouse completing the 1031 exchange must “intend” to hold the replacement property for investment or business purposes rather than for a gratuitous (gifting) purposes.
26 USC 1041 - Transfers of Property Between Spouses – allows for tax-free transfers of property between married spouses, so it will not cause a gain.
The core issue is about “holding for investment and business purposes” after completing the exchange, and “continuity of investment.” Generally, a taxpayer's intent regarding the property acquired in an exchange has to be to keep the property acquired, and intend to do so with an investment purpose. Regals Realty Co. v. Commissioner, 127 F.2d 931, 933-34 (2d Cir. 1942). The safe answer is the longer it is held for the qualified use…the better. In IRS Rev. Proc. 2008-16, The Service looks at two 12-month periods to determine if a property is held for a qualified purpose.
The IRS and federal courts may examine all of the facts and circumstances surrounding the transaction to determine the taxpayer's true intent at the time of the exchange. See Reesink v. Commissioner, No. 2475-10, 2012 Tax Ct. Memo, at 1 (T.C. Apr. 23, 2012). See also Goolsby v. Comm’r, T.C. Memo 2010-64 (T.C. 2010). See also Danielson v. Comm’r of Revenue, 2013 Minn. Tax, 2013. See also Johnson v. Comm’r of Revenue, 2014 Minn. Tax, 2014.
Reach out to CPEC1031, LLC Today
Reach out to the professionals at CPEC1031, LLC today to discuss the specific details of your next like-kind exchange of real estate. Our team of qualified intermediaries can guide you through the entire process of your 1031 exchange, from the sale of your relinquished property to the acquisition of your replacement property. We have over two decades of experience working with owners of investment real estate who want to defer their capital gains taxes and keep their money working for them. Contact us today to learn more!
Defer the tax. Maximize your gain.
© 2025 Copyright Jeffrey R. Peterson All Rights Reserved
