Atlanta Deferred Exchange
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Atlanta Deferred Exchange

How Long do I need to own a property before I can do a 1031 exchange?

   

 

Q:  How long must I own a property before it qualifies for a 1031 tax-deferred exchange?

 

A:  There is no minimum time that a taxpayer must own a property in order to properly complete a 1031 exchange. Many tax professionals feel that if a relinquished property would qualify for long-term capital gains treatment (i.e. it has been owned for at least one year), an investor is safe in seeking 1031 exchange treatment. As background, the IRS has twice requested, in 1989 and again in 1997, that Congress implement a minimum one-year holding period for property to qualify for a 1031 exchange. Neither of these requests were approved by Congress, so there is no statutory minimum ownership period that applies.

 

Please be aware, however, that certain types of real estate do not qualify for 1031 exchanges. These include “flip property” which is property held primarily for sale or any property that would be considered “inventory”. How long a property is owned by a taxpayer is one just one of the factors that is analyzed when determining whether or not a property qualifies. Other criteria that come into play relate to the original intent of the taxpayer, actual marketing activities, and how the property is reported for federal income tax purposes. It is important that these additional elements be considered along with the length of time the property is held to determine the viability in executing of 1031 tax- deferred exchange.