My client bought a house that her nephew lived in and fixed up. He paid no rent. Now he wants to move to a different state and do the same thing. Is this an investment property for which a like kind exchange could be applicable?
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A relative lived there free. Sounds like personal use to me.
(Unless something rare such as owner recorded rent received as well as compensation paid, to turn it into rental property. Or, it sat vacant to turn it into investment property.) -
I agree...this sounds like trying to 1031 your own home unless there is some proof that it was purchased as an investment, not a second home, and the intention was to flip it as soon as all the work on it was done. Did they have a written contract that may spell this out?Believe nothing you have not personally researched and verified.Comment
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Yes, the property should qualify as investment property and, thus, be eligible for a §1031 exchange.
The nephew who lived there is not a disqualifying relative as defined in Code §267(c)(4). Accordingly, his use of the property does not count as personal use under §280A.Roland Slugg
"I do what I can."Comment
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Doesn't §280A(d)(2)(C) say that any other individual that uses the property without paying Fair Market Value makes it personal use?Accordingly, his use of the property does not count as personal use under §280A.
Although §1031 doesn't refer to §280A, Revenue Procedure 2008-16 (dealing with personal use for a 1031 exchange) does refer to §280A(d).
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