The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.
Turning a Personal Residence into a 1031 exchange, Part 2
You’d be surprised how well this works: when you rent out your personal residence for a couple of years, a 1031 exchange deal can greatly lower your tax burden! Consider this:
Suppose a couple buys a home in 1979 for $125,000. They put about the same amount into capital improvements – added a pool, better appliances, a sun room, etc. Twenty five years later, they rent the home out for 2 years. After that, the sale of the property, eligible for a 1031 exchange, gets them a lot of excluded cash from full local and federal capital gains tax!
This is the sort of strategy that can help property owners to avoid leaving money on the table when it’s time to offload a valuable estate or home.
Question 1:
I would like to do a 1031 exchange with my home – set up a lease/option for 2 years to qualify. I would like to discuss/interview with local real estate and accomidator folks that have done this in Southern California. Home in La Canada has a value of $1,000,000 + and paid off..
Answer:
Congratulations! Your plan adheres to IRS Rev Proc 2005-14. You’re in good shape!
About Marilee: Role of Marilee Hill, Registered Representative (RR)
Over the years, Marilee Hill has been a property owner, a property manager and a FINRA-certified real estate broker – now she helps clients to understand the ins and outs of a 1031 exchange and everything that goes along with these deals. Hill enjoys helping others to find a good starting point on their way to maximizing their investment income and complying with “the rules of the game” according to the IRS and related regulators. While she doesn’t work as a QA, Hill does apply her years of experience in real estate to consulting property owners on what’s best for their real estate plans. Real estate deals can be rocky and hard to navigate – Hill understands the rules and the value of dealing directly with people!
Let her help with a plan to work a 1031 exchange through the allowed process correctly.
