1031 exchange requirements

[Sebastian Madariaga]

Hello BP community!!

I’ve been reading into the 1031 exchange and was curious about a requirement someone was trying to explain to me.

I was told if you complete a 1031 exchange you must rent out the property for xx amount of years, then live it in as a primary residence for xx of years ?

After reading up on it, I can’t seem to find this requirement anywhere. Was wondering if anyone has completed one or have heard this being a thing ?

Look forward to the responses, Thanks in advance!

Sebastian

[Michael Plaks]

@Sebastian Madariaga

You're mixing together two completely different ideas. One is selling your own home, where you live now. After you lived there for 2 years, you can basically sell it tax free, with some restrictions.

The other is selling a rental property which you rented to other people. If it grew in value significantly during this time, you might owe large capital gains taxes when you sell. 1031 exchange is a way to delay paying these taxes. Generally, you're expected to rent it for longer than a year before you exchange, however it is not a firm rule, only a suggestion.