Tools and Investment
1031 Exchanges Get New Time Limits
1031 Exchanges Get New Time Limits
What that Means for You
October 22, 2004. President Bush signs into law a new tax legislation that changes the provisions of Section 1031 and 121 of the tax code.
What it means for you:
Now, a taxpayer who exchanges under Section 1031 into a rental home as a replacement property that is later converted into the taxpayer’s primary residence may not exclude gain under the principal residence exclusion rules of Section 121, except if the sale occurs at least five years from the date of attainment. The modification of the tax law increases the number of years the taxpayer must own the residence; from three years to the now required five years.
When the taxpayer has lived in the residence for two out of the five years (required) they have owned it, they can sell the residence and defer all of the capital gains including the gain from the 1031 Exchange portion, to a maximum of $250,000 for a single taxpayer or $500,000 for a married couple. Any taxpayer who previously acquired their present residence using their 1031 Exchange proceeds before October 20, 2004 is not mandated to meet the five year requirement.
Heaven Investments Holding Corp encourages investors to benefit from the utilization of both the Section 121 and Section 1031 to reap tax free investment dollars for years. Contact us today to get started!
