Like kind (1031) exchanges require that you swap property for replacement property. How long do you have to hold the replacement property? There is no safe harbor; the issue is intent. Cases have held that if, at the time of the exchange, you intended to sell the property acquired, the exchange won't succeed. 1031 exchanging a property for a rental house will qualify as like kind. Subsequent behavior is used to determine intent at the time of the exchange. If a short period of time after the exchange you convert the former rental into a personal residence you may taint the required intent at the time of the prior exchange. This is a "fact sensitive" issue. Did you have a contract signed before? How much time passed? Did you really rent the property after the exchange? Was it rented for an arm's length price to an unrelated person? There is no bright line rule. In Click v. Comer. 78 TC 225 (1982) as an example, the court said that holding the property for seven months and then making a gift of it demonstrated that the taxpayer did not intend to exchange it at the time of the 1031.
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