With a 1031 Exchange
Did your summer travels expose you to places you can envision retiring to? With the proper structure you may be able to use a 1031 Exchange to purchase your future retirement dream property.
After selling your investment property and using the proceeds to purchase that fabulous dream property (your replacement property in your 1031 Exchange), you will need to temporarily rent it out to comply with Revenue Procedure 2008-16. Rent the property at fair market rental for at least 14 days during each of the first two years after the exchange. Make sure your personal use is no more than 14 days in each year. When you are ready to retire, sell your existing principal residence and exclude your primary residence capital gains tax (up to the $250K / $500K limits under IRC Section 121). Then make your dream home your new principal residence with no additional tax consequence. Taxes have been deferred/excluded under Sections 1031 and 121.
Although your replacement dream home property cannot immediately be used as your retirement home, with a little time and patience you can retire into it and avoid capital gains tax. Cheers to retirement.
DISCLAIMER: The information above is based on the current tax code, which is subject to change. The above information should not be considered to be tax advice. With all investments and wealth maintaining strategies, we advise you to seek the advice of your qualified legal and tax advisors for your specific situation.
Patricia A. Flowers Vice President Certified Exchange Specialist New England Region (877) 781-1031 Toll Free email
IPX1031 – Choose the Experts
IPX1031 is the largest national qualified intermediary providing a full suite of services. As the nationwide leader in tax deferred exchanges, IPX1031 is here to offer you the best in service, experience and security. When you choose IPX1031 as your Qualified Intermediary, you can be confident that your exchange will be handled expertly and that your funds will be safe, secure, and available when needed. Contact IPX1031 to discuss your 1031 Exchange solution.