Does this property qualify for a like kind exchange

[momona]

Taxpayer has a rental property that he wants to do a like kind exchange with another property that he intends to rent out and never live in BUT there's a catch.

The building rules say that an owner cannot rent out the unit in the first year. It doesn't say he cannot live in it. Is it a like kind exchange? If so, can add the maintenances fees, etc. to basis?

[Burke]

He would be trading rental property for a personal residence. Not a like-kind. Not sure if it would work or not if he left it vacant for a year. Don't think so, since he could not put it in service as rental property. He may have to find something else.

[Steve Stang]

Perhaps I'm just stretching but I would think that 'intent' counts. I'm thinking that he could do the exchange and leave it vacant. And then rent it out after one year. On the other hand, he could see what the ramifications from the HOA are for renting it out before one year. The IRS doesn't really care about the HOA rules. His neighbors might but that's a different story.

Isn't this sort of like the 1031 exchange into a property that eventually becomes the TP's primary residence but in reverse? In that case, I recall discussion about intent to rent (i.e. advertising, not occupying it for some 'reasonable' time whatever that is).

[momona]

His not occupying the property for a year clearly signals his intent. But the fact that it cannot operate as a rental property for a full year makes me question of whether this would pass the definition of like kind exchange.

[Gene V]

I would think it qualifies for Sec. 1031 Exchange, as long as the property is held for investment purpose.

See attached link:

https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031

What property qualifies for a Like-Kind Exchange?
Both the relinquished property you sell and the replacement property you buy must meet certain requirements.
Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.
Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.
Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.