Lightning has struck...1031 experts...? - Posted by Ben (NJ)

Posted by Jay (TN) on June 25, 2001 at 08:34:32:

As far as I know, you are free and clear of any tax liability (at the time of converting from investment to personal use). People change. Their needs change. HOWEVER, if you later sell the personal residence, The Uncle may have his hands open for collection. There are tax documents that should give you guidance on your liability. I believe you would be responsible for the depreciation during the time the property was a rental, but still you need to do some research.

Good luck,

Lightning has struck…1031 experts…? - Posted by Ben (NJ)

Posted by Ben (NJ) on June 24, 2001 at 20:00:09:

I have known about the 1031 exchange for awhile but may finally be in a position to utilize it. I am currently working on the sale of three investment properties, each will incur significant capital gains. Coincidentally, we have been renting beach houses for years and are now seriously considering the purchase of our own beach home. Suddenly lightning struck me! Can I sell the three investment properties and roll over the proceeds into a nice beach home? Would the beach home be considered property of like kind? I have just listed the first of the three properties so I have plenty of time to get this rolling right? Any help is appreciated.

Re: Lightning has struck…1031 experts…? - Posted by Tom

Posted by Tom on June 25, 2001 at 02:12:55:

Watch your timing carefully. You really need to close on all three beach houses in a small time frame to make all of them useable in the 1031…

Re: Lightning has struck…1031 experts…? - Posted by Jay (TN)

Posted by Jay (TN) on June 24, 2001 at 22:38:56:

Nate is correct. The property you buy must be an investment property. Now, you can convert the property to a personal home after about 1 year. In a seminar for 1031 Exchanges, I was advised to hold for 2 years to be safe. We are in the process of selling some investment properties, where Uncle Sam may see large capital gains and depreciation recapture. Fortunately, with 1031, the net gains can be leveraged into additional properties. It is one of the few real tax loops.

Good luck,

Re: Lightning has struck…1031 experts…? - Posted by Nate(DC)

Posted by Nate(DC) on June 24, 2001 at 21:01:45:


To be considered “like kind”, the property you buy must be investment property. It cannot be your personal residence or a second home.

However, you could definitely buy a beach house which is an investment property, and use it for a short time each year. I am not a CPA and will defer to someone who knows…but I believe one can use an investment property for personal use up to X days per year (10? 14?) and not jeopardize its status as investment property.

You could also exchange into a beach home which you would intend to hold as an investment, and rent out for, oh, a couple of years at least, at which point - BOOM! - you would have a change of heart and decide to make it your second home. That would be permissible too (although it’s kind of a gray area - there’s no definitive guideline on how long you have to hold the property before converting it to personal use, and I imagine that if you did this often, especially after short periods of holding as an investment, the IRS might object).

Hope that helps…I am sure others will chime in as well. You might want to post this on the commercial board as well, as there are more folks over there with 1031 experience.


Re: Lightning has struck…1031 experts…? - Posted by DavidV

Posted by DavidV on June 25, 2001 at 24:09:52:

If i converted a rental i had done a 1031 on to a personal residence after a couple of years, what would be the tax treatment there?