Discussion:1031 EXCHANGE - RENTAL QUALIFYING PERIOD

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Discussion Forum Index --> Advanced Tax Questions --> 1031 EXCHANGE - RENTAL QUALIFYING PERIOD
Discussion Forum Index --> Tax Questions --> 1031 EXCHANGE - RENTAL QUALIFYING PERIOD

BARBOLEARY (talk|edits) said:

21 August 2009
I picked up a new client for the 2008 tax season. Client’s mother gifted my client an out-of-state home effective 10/1/08. Gift tax return was prepared.

Now the client e-mails me and tells me that she wants to do a 1031 Exchange and buy a place locally.

I called the client and told her that in order to do a qualified exchange that the property must be a business or investment property. Client then tells me that this place is being rented out to someone who has been there for years but is not paying fair rental value because she can’t afford it.

I told her that she should amend her tax return in order to make it a rental, wait two years and then do the 1031 exchange.

The Intermediary that she is dealing with told her to proceed with the sale.

I disagree with the Intermediary. Does this sound correct or am I missing something?

Kevinh5 (talk|edits) said:

21 August 2009
who cares what the intermediary says, what matters is what's on the tax return

you can always disengage if you are not comfortable - she will find someone who sees it her way

BARBOLEARY (talk|edits) said:

21 August 2009
Thanks.

Kevinh5 (talk|edits) said:

21 August 2009
for what it's worth, I agree with you. She should claim the rent and amend the prior returns. Then it qualifies as investment property. Right now it looks like a 2nd home.

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