luxury_inc

[luxury_inc]

What is the name of your state? California
My friends completed a Starker 1031 exchange 6 months ago. Since, they have been fixing and remodeling it, so far it was never rented. How long can they be "fixing" it before renting as not to nullyfy the whole exchange and be responsible for captial gains?

 

[tranquility]

Except for the strict time lines in the statute, the answer to "how long?" is that it depends. Here, I'm not sure what you're asking. If they're fixing up the house to resell or to later rent, there is not a problem. If they're fixing it up for that reason and then decide to live there, then there is a problem (maybe). It would get down to the facts and circumstances to try to tease out intent and the like. That's where the how long question comes up. The IRS tries to infer intent by the length of time people treat a thing. If all a person does is fix up a house and later he moves into it, I'd say he's going to have some explaining to do no matter how long.

 

[luxury_inc]

luxury_inc re:1031 Starker exchange

I'm thinking if they keep on fixing and improving this property for let's say a year, then do their income taxes for that year and not show any rental income or even effort, IRS might look at this as a fallen transation, they might get slammed with capital gains tax. So I am just wondering how long do they have before putting the property in service? being that they can only use it for 14 days a year for their own use.