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Property swaps allowed any time
Dear Tax Talk:
Can I do a 1031 exchange on the house that I purchased
about two months ago? If I sell it, it would produce a little profit
(capital gain). I have my own principal residence. Would that house
that I just purchased be considered an investment property if I exchange
it for another new purchase of rental property?
Benjamin
Dear Benjamin:
Section 1031 does not require that you hold a particular piece
of property for a specific period for it to qualify for gain deferral.
If you bought the house two months ago with the intention
of making it a rental property, then it would qualify for the like-kind
exchange rules.
Of course, if there is little or no gain to be realized
on the sale then the added transaction costs of doing the exchange
might outweigh the tax due. When analyzing the costs, remember that
the holding period of the property is short-term so that you'll
pay tax at ordinary
income rates. However, if you have capital losses this would
be applied to the gain.
-- Posted: Aug. 8, 2003
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