1031 Exchange FAQ Blog

In order for your primary residence to be considered for 1031 Exchange treatment it must considered as “Real Estate Held for Business” use and not “Real Estate held for personal use”. We recommend that you should be collecting rents on the property for at least 2 tax periods so that you can prove to the IRS that property is now a business. This can be tricky and several other professionals will offer up different numbers or theories as to how long you should be collecting rents on a property before it can be considered for 1031 Exchange. It is our experience in over 20 years in this industry that 2 tax periods is ample time to prove a property is a business. Better safe than sorry. Remember, the IRS controls every aspect of the 1031 Exchange. Best not to give them reasons to disqualify your 1031 exchange.