Question:
“I’m going to get into house flipping and do tax-deferred exchanges to roll my gains into the next flip and avoid paying taxes. My tax person said that will work…”
Answer:
I always defer to tax professionals…except when they’re DEAD WRONG!
The IRS says that a property must be “held for investment or used in your trade or business” to qualify. So you’re in the clear, right?
Nope.
IRC Section 1031(a)(1) states that property that is “stock in trade” or “held primarily for sale” is specifically excluded from the benefits of 1031 exchanges.
The Code says that property held primarily for sale, whether to customers in the ordinary course of your business or otherwise, is not property that is held for investment.
As usual, because I’m not a tax professional, I recommend that you confirm this with a tax pro…but NOT the one you’ve been talking to!
