Rental Property Rehabbed to Sell -- 1031 Exchange Implications

[Christopher Mendoza]

Hi BP Community. What are the implications for a 1031 Exchange if a long-term rental property is rehabbed prior to sale?  For example, the homeowner improves the interior of the house (vacant with no tenants) in order to get a better offer and return on investment. 

Is it a sliding scale (e.g., a certain amount of work will convert the rental into a flip)? If there is a sliding scale, where is that delineating line between rental (with 1031 benefits) and flip (loss of 1031 benefits)? 

Any and all answers or thoughts are appreciated. Thanks in advance. 

[Curtis Bidwell]

Not speaking as a 1031 Facilitator, but I believe any work put in would be Capital Improvements and simply increase your basis in the property, as long as it was a rental for at least 2 of the past 5 years.