Can I rent a property from my husband to complete a 1031 exchange?
June 21, 2004
Subject: 1031 Question
Date: Sat, 24 Apr 2004
My husband and I have been married for 4 years. We have been living an a small apartment and want to live in our first home. My husband had owned an investment property for 12 years with his sister and brother-in-law. Last year, they decided to sell the property, split the sales price and go their separate ways. In order to defer the taxes, we were forced to do a 1031 exchange.
We would rather move into the property than rent it for 2 years.
I was not part of the investment property, and I was not involved with the sale of that property, but my name is on the documents for the replacement property. Can I move into the property as the renter and have only my name on the bills? Then could my husband live there, too, without being taxed?
Date: 28 May 2004
If you move into that property without renting it for some time first, you could blow up your husband's exchange and you two will owe the tax on the sale of the apartments. Either you will have to be patient or "bite the bullet" and pay the tax.
We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.
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