Residential into rental to 1031?

[Cindy Harney]

I searched all of the questions on the forum and couldn’t come up with an answer to this one...

My husband and I own a house as our residence but are building another house and are going to turn the current one into a rental.

Curious how long we have to hold it as a rental before we can use it in a 1031 exchange. We have about $50k equity, which we would rather invest in something that cash flows better.

I have also done numerous google searches trying to find this answer and I just can’t seem to find the answer. Any help would be greatly appreciated!!

[Wayne Brooks]

@Cindy Harney

The main question would be Why?

1) popular opinion  says you’d need to keep it as a rental for 1-2 years before doing a 1031......but, you would Not want to do this unless the property was a rental for years Before it was your primary, because.....

2) as your primary residence, you can sell and any gain is Exempt from taxes, up to $500k in gains for a married couple, irs section 121. There is No requirement to buy another primary or reinvest the money.  If you owned it as a rental Before it was your primary, you only get a pro rata exemption.

You Can retain it as a rental for Up to 3 years, and still receive the exemption, If you want to.