Can I 1031 An Investment to Buy a Primary Residence?

[Polo Vazquez]

Hello expert CPA friends or Lawyers at BP!!
One of my clients recently asked me if he could sell an investment property (a rental) with a 1031 Exchange and use that money to buy a primary residence. I didn't know what to answer and was hoping somehere could help me.

Thanks in advance.

[Bill Exeter]

Hi @Polo Vazquez, 

No, not initially.  The intent has to be held for rental, investment or business use in order to satisfy the Qualified Use requirement of the 1031 Exchange.  However, they could change their intent a few years later and convert the rental/investment property into their primary residence.  They would need to hold it as an investment property long enough to demonstrate their intent to hold as a rental property in case of an audit.