I have a client who has owned real property that used to be used by her family. But it has not been used for anything for several years.
The client is talking about selling. I am advising him to convert it to a rental for six months before he sells, so that he can qualify for a 1031 exchange.
That should work - am I missing something?
Thanks.
I don't believe it has to be rented at all. As it has not been used as a residence for at least a year and a day (you said several years) it already is investment property. That makes it qualified property for a
1031 exchange.
I'm sure you know this already, but the tax tail shouldn't wag the financial dog, and a 1031 exchange is pretty much all about deferring current taxes, right?
If the client is "talking" about selling, why is re-investing in more real estate a good idea? What if tax rates are higher in the future? What about gift or charitable donation? What does taxpayer really want to accomplish, anyway?
All questions rhetorical.
good points, but my guess was that the client is talking about "selling", not "talking" about selling.
Right.
There are several reasons for the switch. One reason is that the location of the current property is inconvenient. Another is that commercial property is generally easier to manage than residential property.
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