Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
1031 Exchanges
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 10 years ago,

User Stats

33
Posts
17
Votes
Jimmy Wilson
  • Flower Mound, TX
17
Votes |
33
Posts

1031 to primary residence conversion strategy

Jimmy Wilson
  • Flower Mound, TX
Posted

While listening to a Guru selling dreams, I heard something that really caught my interest.  Here is the situation described:

1.  Investor X has 5 rental houses that he has acquired over the last 15 years and is ready to retire.  All 10 houses have gobs of depreciation stank all over them and he wishes to 1031 exchange them into the next property.

2.  Investor X decides to sell all 5 houses at the same time, and uses a 1031 fiduciary to retain all proceeds from sell.  Investor X then goes out and identifies 3 nice properties in Vail, Colorado that he wishes to purchase within the 45 day period.  The purpose of the properties he has identified will be used as a vacation rental.  

3.  Investor X buys the ski property in Vail, Colorado for 499K with his proceeds from the 5 houses he sold from the 1031 exchanges (within the 180 day window) and sets up the vacation rental and starts renting it out for 3 years.

4.   Investor X then decides that after 3 years, he wants to move into the Vail property and make it his primary residence.  He does this, and lives there for 3 years and 1 day.  Then, he decides to sell the property for 498K.  He lost 1k on the whole deal :(  

This is the part that got a little muddled for me.  Investor X sells the property in Vail and all of the depreciation stank from the 1031 magically dissolves itself under the 121 code, thus allowing him to end the trail that would normally go to a stepped up basis upon his death.  

What is missing here?    

Loading replies...