Stocks, bonds, notes; interest in a partnership; stock in trade or other property held primarily for sale. Q: Can 1031 exchange be used for a primary residence?
No. Section 1031 applies only to investment properties. However, sometimes Taxpayers acquire a property through a 1031 exchange, rent it out for a couple of years, then make it their primary residence. A property acquired through a 1031 exchange, and later converted into a primary residence, must be owned by Taxpayer for five years from the date of the exchange before Taxpayer can claim the capital gains exclusion. Thus, to utilize a 1031 exchange and the capital gains exclusion on the primary residence, Taxpayer must both have used the property as primary residence for 2 years, and owned it for 5 years.
