El Jefe was 110% correct on the 5 year holding period designated in 2004. So 2 out of those 5 you need to occupy to get the exemption.
So I am an engineer and I am a Realtor. I am not a CPA or an accountant so my first disclaimer is talk to your CPA regarding the tax laws. With that said, the IRS will recapture the depreciation for your property for every year you did not occupy it REGARDLESS of whether you applied a depreciation expense to it or not. So when the 1031 event occurs, you need to adjust your original basis. This will predictably create a larger tax burden for you. Thus, if you bought a 500k property 5 years ago, and now you buy another 500k property it will not be an equal value exchange. The IRS will recapture 5 years worth of depreciation to the first property so you will actually have a deferred tax gain that you will shelter by purchasing the next property.
Again, confirm this with a CPA… confirm this with a CPA… confirm this with a CPA…
Anyways, I think there are good ideas presented here but like I said, I would confer with your financial planner. That is why I am not making any recommendations at all. While some of the ideas may present a better return then others, you may have tradeoffs of how involved you will need to be to get that return that should be considered. So be open minded, measure all the different proposals and bring them up to your planner.
