i took the time to look up 1031 on the irs web page. there is no time frame mentioned (unless they changed it in a month) intent is the reasoning they look at. there have been exchanges done with as little as one month ownership. the key is your intent, if you intend for the property to be a “keeper” and change your mind then an exchange is the way to go. if you intend to rehab sell turn around and do it again then your intent becomes very clear to the irs and you will have to pay your taxes. there is nothing wrong with changing your mind. the guy that i am refering to that did it in a month covered his a$$etts by putting the home on the market as a rental. then after repairs he changed it to rent/sale. he proved intent by offering it for rent… Im not a lawyer if i were i would be selling my education to increase my net worth so go to the IRS web site and check it out.
tax ramifications for investing in fixers - Posted by domenic scire
Posted by domenic scire on July 20, 2002 at 01:39:57:
i am a new investor looking to rehab and flip real estate. how can i avoid paying taxes on the fixers that i plan to buy and quickly sell. do i need to form a llc. i would appreciate it the helpful insight.
Why sell? refi at 80% LTV. Buy them so you can put $10k in your pocket at this time… TAX FREE. (You dont pay taxes on borrowed money) Then rent out to have tenant pay the loan off plus a couple hundred per month.
PLus you get the tax perks from holding these PLUS equity gain!
If you dont want to manage them, turn them over to a management company. (But be cautious in choosing one)
domenic,
You do what is called a 1031 exchange. It is where you take your gains and place them in a 1031 exchange and they are sheltered from the tax man. The only thing is you must purchase another property with the money. If you are looking to take cash and run, I dont see where you can avoid paying on your capital gains. You should consult your accountant on this matter.(which I am not)
Good Luck,
Gary
I believe you have to hold properties a year or so before you can 1031 exchange tho. And 1031 is for passive (rental) type property. Flips are considered “dealer” and are ineligible.