Help a Simpleton!

[Ed L.]

For Example:
Purchase a $50,000 home spend $20,000 in rehab. Sell for $100,000

That results in a net gain of $30,000 of taxable income.

Would I be able to perform a 1031 exchange and buy a $30,000 rental home free and clear with no tax burden.

[Jon Holdman]

Not as you described. 1031 exchange are for investments. Buying, rehabbing and selling a house isn't an investment, in this context. The gain from that sale is ordinary income.

Now, if you did this and held it as a rental for at least a year, then you could do an exchange into a rental. However, there are limits on the replacement investment. The value of the replacement property has to be equal to or greater than the one you sell.