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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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On a 1031 exchange, in the examples you have given me. How

Resolved Question:

On a 1031 exchange, in the examples you have given me. How long do you have to rent a property before you can take it as a distribution of the LLC and claim personal residence? What happens if you can't find a suitable tenant in 6 months? is it still okay do this with a single family home or is a condo preferable?
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Lane :

Hi,

Lane :

The personal residence (for purposes of taking a capital gains exclusion) has a use and a time test ..... You have to have actually used it AS your personal residence, and have to have lived in the home for any 24 months - don't have to be continuous - out of the last fuve years

Lane :

dorry "Five" years

Lane :

1031 exchanges, however, CAN NOT be done with personal residence ... must be investment or business use ... and the property exchanged for has to be like-kind (business for business - investment for investment, etc)

Lane :

Here's an excellent overview of the 1031 exchange: http://www.1031.org/about1031/faq.htm

Lane :

I think this answers it all ... to answer your specific question ... if you pass the personal residence test for excluding gain on sale AND you never rented or took any rental tax deductions, then you'll have no problem excluding the gain .. as it was never a rental ... but again on the 1031 exchange piece THAT is a way of DEFERRING gain into the next property when it WAS a business or investment property.

Lane :

Hope this hells

Lane :

Lane

Lane :

If this has helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only I get credit for the work.


However, if you need more on this, please come back here, so you won't be charged for another question.

Expert:  Lane replied 8 months ago.

 

Hi Frank,

 

Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.

 

If you have any questions at all please let me know.

 

Lane

 

Customer: replied 8 months ago.

question intended for taxmanrog please forward to him.

Expert:  Lane replied 8 months ago.

Hi Frank,

Just checked an he is not online.

Here's the screen that shows which experts are online:

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If an expert is not online then the question simply goes out to the question list (in the interest of getting an answer to you quickly)

I can opt out, but as long as ROger is no online it will simply go out to the general question list again for the experts that are currently online.

What you may want to consider is using Roger's profile ... that will provide a 15 minute lock before it goes out to the questions list. ... You can get to his profile here: taxmanrog

But, again, if he does not come online for another 15 minutes after that it will still just go out the list, so another expert can help.

Let me know what you'd like to do.

I'll opt out as soon as you say...

Lane
Customer: replied 8 months ago.

question intended for taxmanrog please forward to him. thanks

Expert:  Lane replied 8 months ago.

Again, we cannot forward.

All we do is check to see if an expert is online, and I hvde done so AGAIN and Roger is not on line.

As documentation AGAIN, Here are the experts that are onlie now.

TaxfastfileSend PMinsearchoftheanswerSend PMKUMI95Send PMlevrSend PMMyVirtualCPASend PMnpvadvisorSend PMPDtaxSend PMsocrateaserSend PMTax.appeal.168Send PM
I will opt out now.

Lane
Expert:  Rachel-Mod replied 8 months ago.

Hello,

I'm Rachel, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.

If I can help further, please let me know. Thank you for your continued patience.

Best,

Rachel

Expert:  Lane replied 8 months ago.

Hi Frank,

It's been a couple of days, and it looks like you still don't have an answer.

If you'd like to dig into this some more let me know.

Lane
Expert:  taxmanrog replied 8 months ago.
Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

I am sorry, I had some personal matters that I had to attend to.

A personal residence does not qualify for an exchange. However, if you exchange an investment or rental property, you can then convert that to personal use. There is no specified time period as to how long it has to be rented or, if not rented, "available" for rent. There is a rule that states that if you do convert a §1031 property to personal use, you have to hold it as your principal residence for 5 years (not the 2 generally used) in order to claim the $250k/$500k exclusion that is allowed under IRC §121.

I tend to be somewhat conservative on issues such as this, so I would try to rent it out for 6-12 months or so. If it is available for rent, you can still deduct the expenses, even though there is no income to offset. This can, depending on your other income, offset some of your wages or other income.

I hope this helps! Thanks for asking for me! If you have found my answer helpful please rate me highly. I would appreciate that!

Again, thanks! Have a great week!

Roger
Customer: replied 8 months ago.


thanks, XXXXX XXXXX 2 years is used for a primary residence that is purchased as such. ?

Expert:  taxmanrog replied 8 months ago.
No, for a primary residence, the two year rule becomes a FIVE year rule in the case of a property acquired in a §1031 exchange. So you have to live in it as your principal residence for FIVE years in order to exclude the gain.

Thanks!

Roger
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 377
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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