1031 Exchange time frames

[Michael WIlliams]

Hello my fellow BP'ers, 

Quick question, I purchased two rental properties in November 2019 and I now have an opportunity to buy two more that are performing considerably better than the two I now own. I would like to 1031 exchange the two I bought in 11/19 for the two new ones, how long should I wait to use a 1031 exchange on rentals? I've been told that the IRS prefers you hold on to an investment property for at least a year prior to using a 1031 on it. Has anyone experienced any issues using a 1031 exchange in under a year? Thanks in advance for your feedback.

[Lauren Speidel]

@John Warren Thanks so much for the tag! @Michael WIlliams The IRS does not state that you must hold a property for any specific amount of time but most 1031 Exchange experts usually recommend holding the relinquished property for at least 12-24 months to prove your intent. Intent is critical with a 1031 Exchange. You must be able to prove that you had the intent to hold both the relinquished property and replacement property for investment purposes (being rental income, appreciation or use in a trade or business). Actually doing it will prove your intent under audit. With this being said, we certainly have had clients hold their properties for much shorter periods of time. Your situation is falling into a grey area and you could possibly argue that there was a good financial reason to sell and buy these new properties. It is always recommended that you discuss your strategy with your tax advisor as they will be the one reporting your taxes and giving their "blessing" on the 1031.