Written by James Brennan on January 20th, 2007 with Read more articles on Web Properties and inside1031.com and CardeaCommercial.com and Calc_Q2 and All the Questions You Were Afraid To Ask About 1031s.
The longer the better. Unfortunately, there is no safe holding period for property to automatically qualify for an exchange. Keep in mind, the property only need to be “held for investment” for it to be eligible for an exchange. Time of ownership is ONLY one factor at which the IRS looks at when determining if the property was “held for investment”. In one private letter ruling (PLR 8429039), the IRS stated that a minimum holding period of two years would be sufficient. Although a private letter ruling does not establish legal precedent for all investors, there are many advisors who believe two years is a conservative holding period, provided no other significant factors contradict the investment intent.
Other advisors recommend that Exchangers hold property for a minimum of at least twelve months. The reason for this is twofold: (1) A holding period of 12 or more months means the investor will usually reflect it as an investment property in two tax filing years. (2) In 1989, Congress had proposed a one year holding period for both the relinquished and replacement properties. Although this proposal was never incorporated into the tax code, some believe it represents a reasonable minimum guideline.
Written by James Brennan on January 20th, 2007 with Read more articles on Web Properties and inside1031.com and CardeaCommercial.com and Calc_Q2 and All the Questions You Were Afraid To Ask About 1031s.