Does failure to rent disqualify a property from Section 1031 deferral?
Property held solely for appreciation qualifies as held for investment under Section 1031. The Treasury Regulations specifically define held for investment as follows: Unproductive real estate held by one other than a dealer for future use or future realization of the increment in value is held for investment and not primarily for sale. Thus, failure to rent property is clearly not fatal to its characterization as “held for investment” under Section 1031. Does personal use disqualify a property from Section 1031 deferral? There is no definitive answer. In Private Letter Ruling 8103117, the taxpayer owned two properties they intended to exchange. One property was intermittently rented out for a period of time and then for several years thereafter not rented at all. The second was purchased by them solely for personal enjoyment of the community and to make a sound real estate investment. The replacement property acquired in the exchange was for personal enjoyment of the community and to
