Tax Questions Regarding "Unplanned" Flip

[Paul Castillo]

Earlier this year my wife's uncle unexpectedly passed away. Her remaining Aunts and Uncle were handling the estate.  They were much older than the deceased Uncle and were struggling with having to be at the house for the extensive work it would take to get it ready for sale.  I bought the house from them with the intention of turning it into a rental.  Unfortunately I needed to sell it to cover another investment home and now I'm reading about possible tax repercussions because I essentially am flipping the house after owning it for about 6 months.  I paid $275K and sold it for $352K.  It's scheduled to close in a few days and I don't know if I could do a 1031 exchange at this point. Does anybody have any advice on how to avoid a major tax hit.  I will of course verify any advice/suggestions with my accountant.  Thanks in advance.

[Dave Foster]

@Paul Castillo, @Natalie Kolodij, is right, if you purchased the property with the intent of reselling (flip) you cannot do a 1031.  But the criteria is what was your intent when you purchased it.  As stated in your post, your intent was to hold it for rental use.  That intent would indeed qualify the property for a 1031 exchange.  However, you also want to be able to demonstrate that intent.

Factors that would give credibility to your claim could include your normal practice, communications you had with professionals and your relatives as you were buying it, and the specific reasons that would cause you to change your intent from holding to resale.

These types of things happen.  You start with the intent of buying and holding and something compelling forces you to change your intent.  If it happens one it's a fortunate accident.  If it happens several times a year you're a flipper looking for an excuse :)