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I don't know if you Fools can help me or not. Perhaps you will have a suggestion…

Dad was hoping to do a Section 1031 to delay capital gains tax. This house has just been sitting – no rental, no claim of 2nd home, and no deprecation listed on taxes. He has spoken to one company www.exchangeresources.net who says he is definitely eligible for the section 1031. However, the real estate agent dad was going to list the house with uses www.naexchange.com. They said that since he has not depreciated the real estate, he is not eligible. Who does he trust? How do we find out the truth?

Thanks!

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Who does he trust?

The one that indemnifies him if they're wrong. Good luck.

I don't know enough about 1031 exchanges to type authoritatively, but I'm pretty sure that they're only available for business use property, not for plain old vanilla investment property. This would lead me to believe that if he hasn't been using it as a rental, he can't do a 1031 exchange.

Phil Marti
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I don't know enough about 1031 exchanges to type authoritatively, but I'm pretty sure that they're only available for business use property, not for plain old vanilla investment property. This would lead me to believe that if he hasn't been using it as a rental, he can't do a 1031 exchange.

Pub 544, "Sales and other dispositions of assets", says that qualifying property (for a non-taxable exchange) must be held for "business or investment". And the properties must be "like kind". If he is not making personal use of the home, it appears that he could make a non-taxable exchange for other real property which he plans to hold for investment or for rental or for other business use. But it would be very unwise to undertake such a transaction without the help of an "exchange specialist", because the rules governing such transactions are very strict.

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