Rick wrote:

- quote -

No. Property acquired via a 1031 exchange will not qualify
as a principal residence for 5 years after the exchange
completes. You may move in in years 6 and 7 and get it to
qualify then.

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"Rick" <stromer2[at]aol.com> wrote:

- quote -

"Several years old" doesn't cut it because the law changed
last fall. You now have to wait 5 years after the exchange
before selling the property in order to claim the personal
residence exclusion of gain; you owe tax only on the
accumulated depreciation since May of 1997.

Also, if you immediately occupy the home as your personal
residence, there is no 1031 exchange. You can only exchange
"like kind" property, and that means the replacement
property must also be used for investment. How long you need
to rent it out before you occupy it as your principal
residence is a question of facts and circumstances. I think
that if you wait until the statute of limitations on the
year of the exchange runs out (April 15, 2009 for 2005
returns) you definitely don't have a tax problem. After a
couple of years and no audit, you're probably pretty safe.
Any less than that and you're taking a risk.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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I am in the process of doing a 1031 exchange with an apt
with some profit and depreciation. I will be exchanging it
for another rental (a single family residence). I then will
move into the SFR in 2 - 3 years. Thus, I will be
converting a rental to a rental to a personal residence. Is
what I am doing considered legal within the 2 out of 5 year
rule or is it not legal and thus owe capital gains taxes and
recaptured depreciation? I have read several other threads
on this group. but none of the topics exactly match or they
were several years old.

Thanks

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