What is a 1031 exchange

Home ownership for less than 2 years - 1031 exchange?

My wife and I bought our first house about 8 months ago. It turns out it doesn't suit us (for many reasons). Because of that, we want to sell it and move to the suburbs on the other side of town and be closer to our families and the place we grew up in.

Because the market in our city is so incredibly hot right now, we will have made more than $ 30,000 in sales by doing this. After selling the issue, I assumed we would owe about $ 1,500 to $ 2,000 in capital gains taxes for not owning our home long enough.

Our broker mentioned 1031 Exchange, a section of the IRS code that would allow us to do a comparable swap with deferred taxes on assets. Has anyone tried that here? As far as I can tell, these are business and not personal assets. It just sounds dodgy, too.

Many Thanks!

littleadv

Don't ask a broker for tax advice anymore than relying on your accountant to do your plumbing.

xboxremote

I would absolutely not rely on him for tax advice. I have an accounting degree myself but am nowhere near a CPA. However, I wanted to get an idea of ​​how doable this is, or whether I shouldn't waste my time talking to a CPA about it, as it is quite expensive to talk to.

JoeTaxpayer

Yes, your broker is an idiot. (I'm a broker, and I'm sorry you have such a bad one.) Every industry has its good and bad. You really should find a new broker, a good one.

You know the 1031 exchange only applies to rental properties. And that $ 2,000 saving is not worth staying in to complete the two year occupancy requirement.

xboxremote

Interesting. See, and he's an investor himself with a lot of real estate (rentals and flips) so it probably easily applies to him, but maybe he doesn't understand that it wouldn't apply in our case.

JoeTaxpayer ♦

You are very forgiving. If he's a broker advising others, he should know what he's talking about. Distributing bad information can cost a customer a lot of money.

xboxremote

That's a good point. And he's not officially our broker yet, so we're not sticking with him. Thanks for the feedback, Joe.