Bought primary house with cash, bought a new primary house with a mortgage,

[Tyler Brobst]

I bought a primary residence in October 2023 with the goal of living in it for a little bit and then selling it for a profit. I bought it for 60,000 and have it listed  for 100,000.  I have already moved out of it and am living in a new primary house.  A side note is I have a coworker who was renting the room upstairs an is continuing to rent while its for sale. 

With the 40,000 profit is there anything I can do to defer my tax? I have looked into some of the rules and it appears that I could not defer this money to a 1031 because at one time this was my primary residence?  

Any help would be appreciated.

[Tyler Brobst]

A side note: I do plan on investing the money into another investment property (non primary) 

[Sean Ross]

@Tyler Brobst, you've got a few hurdles from a 1031 standpoint.  

If you've already filed your 2023 tax return, how did you list this property?  Was it all a primary residence, or did you list a portion of it as an investment asset (with depreciation taken and rental income declared)?

[Dave Foster]

@Tyler Brobst, the generation of income even though you have moved out is one good piece of documentation showing that you are using it for investment purposes.  The IRS doesn't care about the type of loan you have on it.  And  it is perfectly fine to convert a property from primary to investment and vice versa.  

The fact that you have good documentation that you have purchased a new primary residence is also good evidence that you have converted this property from primary to investment.  The only potential hiccup is that you have not owned it long.  There is no statutory holding period.  But it is all about being able to demonstrate that you have used and had the intent of using that property for investment.