1031 Question (Existing Second Home Loan)

[Scott Weston]

We recently purchased a home using a 2nd home loan (with intent to use a few weeks a year and rent the balance which is permitted).

We just got a really compelling offer to immediately sell the home.  Curious if the existence of the second home loan would prevent me from placing the gain into a 1031 and finding a replacement property.  Obviously I would have to go for an investment/commercial loan on the replacement, but curious if this can be executed.

Thanks

[Dave Foster]

Actually @Scott Weston, you may be fine.  the type of loan does not prohibit you from 1031ing that property as long as you were limiting your personal use and were using as an investment also.  There is actually a safe harbor for this in Rev proc 2008-16. 

The real question is your quick sale.  It's not the hold time that matters the most It's your intent in purchasing the property.  It sound's like your intent was to hold it.  and now and "unsolicited offer" is causing you to change your intent.  If you can demonstrate that then you would be able to use a 1031 exchange.  An unsolicited offer is a solid way to demonstrate that your intent was not to sell.  But an offer too good to refuse came along.