1031 Exchange Myths – The Five Year Hold

If you do a search of the internet for “five year hold and the 1031 exchange”, there are many responses talking about this hold period. The truth is, the five year hold is not a requirement of Section 1031, it’s a requirement to prevent you from triggering gain on the disposition of the property that was acquired. Today David Moore talks about what the five year hold really is.


In 1997, when Section 1034 (the exclusion for the sale of primary residence) was replaced with Section 121 (the universal exclusion) there was a brief window of time where taxpayers could acquire a property via 1031 Exchange, hold it a year or so, convert it into a primary residence living in it for the required 2 years followed by an immediate sale. However the government saw themselves losing too much money and put in place the American Jobs Creation Act (H.R. 4520), which made any sale acquired via 1031 and held for primary residence result in a fully taxable sale. The five year hold slowed the governments loss of tax revenue, and in 2008 with the Housing Assistance tax act, the opportunity was for the most part closed.

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David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.