David Taylor
Your Denver Fix and Flip Expert
 
The Good and Bad News about Tax Breaks on a Fix and Flip

A property purchased for purposes of immediate resale is not eligible for a 1031 exchange.  The 1031 exchange allows owners of certain types of property to sell the property and buy other like kind property without paying a capital gains tax.  However, there are many Fix and Flip properties where an investor can make a profit even after factoring in the capital gains tax.

The IRS will allow a property purchased for the purpose of rehabilitation and resale to be eligible for the 1031 exchange if the investor keeps the property for one year and one day-- in other words, two tax years.  A fix-up project typically takes between two and four months.  If the property can be rented out for the duration of the year and a day, or if an investor can afford to keep it vacant, the capital gains tax can be deferred by a 1031.  

For complete information about the 1031 exchange, consult an accountant,  or visit Http://www.irs.gov . or   http://www.xpert1031.com