Seasoning requirements for a 1031 exchange - Posted by Mike

Posted by dealmaker on May 23, 2007 at 07:48:33:

I started to ask how much gain you would be likely to have only owning it for that short a time, and then I re-read the part about 2 years to close!

AFAIK the rule is “held for investment purposes”, but I’d sure want to run it past (a very experienced/knowledgeable in 1031) attorney. I wouldn’t go by what anyone on a website said.


Seasoning requirements for a 1031 exchange - Posted by Mike

Posted by Mike on May 22, 2007 at 21:17:02:

Does anybody know how long I need to hold a property before I sell it via a 1031 exchange? It’s a single family property that I planned to use as a nightly rental. However, due to a lawsuit the closing has been delayed for almost two years. When we do close I would like to sell it to buy another nightly rental in a different market. Can I do a 1031 exchange given that I will only own the property for a very short time and didn’t actually use it as an investment property? Any help would be greatly appreciated!


Re: Seasoning requirements for a 1031 exchange - Posted by Dave T

Posted by Dave T on May 25, 2007 at 19:14:16:

As long as you can document your intent to use the property as an investment rental, you can exchange immediately. Be prepared to present a good business case for doing the exchange (other than tax avoidance) if audited.

Questions about a 1031 exchange - Posted by Gene

Posted by Gene on May 23, 2007 at 19:53:23:

I had question about an exchange I was doing. I asked the exchange facilitator…they told me to ask an accountant. So I asked my accountant and she told me to ask the facilitator. It was clear that even though the rules are clearly stated…there are a few issues that are in the grey area.

Good luck

Another idea … - Posted by Frank Chin

Posted by Frank Chin on May 23, 2007 at 18:30:58:


A non-simultaneous 1031 exchange is only one of several ways exchanges can be done. You didn’t say if the lawsuit is with the seller (sounds like you’re the buyer here), so how you can proceed depends on how cooperative the seller can be.

In any event, the seller’s cooperation is needed before any exchanges can be consummated.

My understanding of 1031 exchanges is there is a holding period involved. If you rather buy another property, with the seller’s cooperation, it still can be done.

There are also the “two way”, and “three way” simultaneous exchanges, besides the more well known 1031 non-simultaneous exchange.

In a “three way simultaneous exchange” (as opposed to non simultaneous), you first find the property you want to exchange into, you find a buyer for the seller’s property. You then close with the seller on propery one, you close with your seller on property two, and then you swap the two, with apropriate adjustments for the differences in values. This is done in one closing.

With this, you don’t run into the issues of holding periods that may snag your 1031 exchange.

Frank Chin

Re: Seasoning requirements for a 1031 exchange - Posted by Michaela-CA

Posted by Michaela-CA on May 23, 2007 at 11:21:41:

this is how it was explained to me by someone doing 1031s for a living/CPA.

Basically, your reasoning have to stand up to later scrutiny. So, INTENT, is the important thing. THere is no hard and fast rule, but generally, 1 year or longer will pass scrutiny. But, let’s say, if you bought something and then got a joboffer in another city, after you’ve owned the property 4 months. Then that would pass scrutiny. I would think that proving that your intent was long-term hold, by showing the extra 2 years, it might be acceptable. That’s my opinion.

As suggested, check with a 1031 facilitator.