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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant
Category: Capital Gains and Losses
Satisfied Customers: 307
Experience:  Tax Accountant at Praxair, Inc.
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My father is giving me (maybe when he dies?) a rental property

Customer Question

My father is giving me (maybe when he dies?) a rental property he owns so that I can buy a primary residence for myself. Is a 1031 exchange the way to avoid capitol gains tax on this?
Submitted: 6 months ago.
Category: Capital Gains and Losses
Expert:  Jonathan Tierney replied 6 months ago.
Hi, my name is ***** ***** I can help. In a 1031 exchange you exchange one property used in a trade or business or another property used in a trade or business. Therefore the rental property you exchange would have to be replaced with another real estate property used in a trade or business. This could be a residential real estate rental or a building used in your business. You would need to rent the replace residence out for awhile before you could convert it to personal use. In addition, if your father dies and leaves you the rental property, the basis in the property is automatically stepped up (or down) to the fair market value on your father's date of death. This means there would (likely) be little gain or loss on the rental if you choose to sell shortly after your father dies. I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions.Thanks, Jonathan

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