Posted by JPiper on March 06, 2000 at 06:19:23:
Sorry to be the bearer of bad news.
Here’s how the law reads : “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.”
Rehabs that weren’t held as a rental for a period of time clearly don’t fit that definition. Typically you would want to hold the property for at least a year, or on the advise of my CPA, two years. As a matter of fact, it’s even possible that the seller-carried note would be fully taxable as well under dealer rules…depending on your entire situation.
None of this will come to light of course unless you’re audited. But if your accountant blessed this particular move, I’d be looking for another accountant. He is badly misinformed in my opinion.