1031 Exchange on Gifted Vacant Lots

[Natalie Carroll]

Hi All,  

  My husband's mother gifted him two vacant building lots earlier this year (March 2024).  We would like to sell them and use a 1031 exchange to purchase a larger tract of land that we expect to close on before the end of the year.    I understand that the IRS requires the properties be for investment, but since they were gifted, I'm not sure what they would look at to determine.   Obviously we haven't held for even a full year, but an exchange intermediary told me there is no bright line test for holding.    

  Anyone have experience or advice?  

Thanks,

Natalie

[Ashish Acharya]

Using a 1031 exchange on the gifted vacant lots depends on proving they were held for investment purposes, not personal use or quick resale. While there's no specific holding period required by the IRS. The key is to show your intent to hold both old and new asset for investment.