1031 exchange minimum hold time and basis questions
Hi — hope this community can help with two 1031 questions. 

I have been in contract to purchase a piece of land and have been in the entitlement process to be able to build an industrial building on it. I was approached by a third party to purchase the entitled land soon after I’ve  completed our purchase. As it relates to 1031 eligibility, would I not qualify if it were the case that we had a contract to sell in hand at the time that I made the purchase?

One other question regarding basis and debt regarding this exchange: Let's say i am going to purchase the land for $250k, and I have invested $50k in soft costs associated with entitling the land pre-closing, and then I sell the land for $600k a few weeks after I close. If I purchase the land in cash, and then purchase a replacement property for $600k, is there a time limit before I could cash-out finance the new property, or would that cash-out be a taxable event?

Thanks!
[{"id": "huyejdl", "text": "There is no minimum hold time for 1031 eligibility. It is all about your intent in purchasing/holding the property.", "replies": [{"id": "huyhllg", "text": "A 1031 trustee put it to me that you essentially get one \"free pass\" on a trade like this where you claim original intent to hold it as a productive investment. Do it again and they may classify you as a dealer, and it wouldn't be eligible for a 1031.", "replies": [{"id": "hv0lvz5", "text": "Thanks interesting take.", "replies": [{"id": "hv1u5lg", "text": "I was looking at something related to this just now and you may want to consider the Allen case in the linked article:\n\nhttps://www.thetaxadviser.com/issues/2014/dec/tax-clinic-07.html", "replies": [], "depth": 4}], "depth": 3}, {"id": "hv1pe3h", "text": "Has he seen this before?", "replies": [{"id": "hv1qaih", "text": "It wasn't specific to this situation (entitled land) but to flipping a property in general. If your business is flipping properties, then you are a dealer and the property is inventory.", "replies": [{"id": "hv1rsn5", "text": "I don\u2019t know how doing it twice gets you to dealer status though.", "replies": [{"id": "hv1tj2e", "text": "What number does? Honestly I have no idea, other than what I was told and shared above. In reading about the five-factor test it seems like the 2nd factor (frequency) can be challenging.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "huygp33", "text": "A refi is not a sale of the property,so that should be affect a 1031 as it's not a taxable event.", "replies": [], "depth": 1}, {"id": "huyn7sz", "text": "Generally you should have intent to hold a property for 24 months.\n\nHow much you want to skirt that is, I guess, up to you.  No different than any other form of tax fraud!  What will the IRS catch and care about? I do think 1031 is generally looked at more closely than other operations.  Keep in mind it's not part of the tax code, it's not a right you have, it's a loophole.\n\nIf you buy with a legitimate intent to use the property as an investment for ~24 months minimum and then your plans change, I understand that is generally acceptable if you aren't doing anything egregious.\n\nIt sounds like you are trying to 1031 a property you are 'wholesaling', which I would not personally be comfortable doing.\n\nCash out refi is irrelevant to 1031 in all forms.", "replies": [{"id": "hva81he", "text": "great resource with reference to applicable tax code [https://www.law.cornell.edu/uscode/text/26/1031](https://www.law.cornell.edu/uscode/text/26/1031)", "replies": [], "depth": 2}], "depth": 1}, {"id": "huyo1lo", "text": "To avoid IRS' scrutiny on intent, either hold for 12 months or have the purchase and sale in two different tax years (i.e. buy in Dec, sell in Jan).", "replies": [], "depth": 1}, {"id": "huznng7", "text": "There is a ton of (usually) well intended advice offered by intermediary's, seminars, and planners around deferring taxes. You'll note that their agreements usually carve-out liability for anything tax related. \n\nA practicing CPA or tax attorney is the place to go for advice on the overall deal, especially - and this is really important - taking into consideration your overall financial and tax picture. I'd happily be wrong but haven't seen anything around \"one free pass\" in the tax code around like-kind exchanges. In any case you are deferring, not avoiding, taxes on capital gains or ordinary income. \n\nI hesitate suggesting this because there is just as much questionable advice given in this are as like-kind exchanges, but could you do this through a self-directed IRA? It's a question for the experts not some schmoe on the internet, but if the funds exist and you can stomach the fees it might be worth consideration. Again, tons of junk opinions from seminars and promoters so get real advice unless you want to risk an even bigger tax bill.", "replies": [], "depth": 1}, {"id": "hv2iq9i", "text": "Do you have a QI? Really they are the ones to talk to", "replies": [{"id": "hv2zn5g", "text": "They said to talk to my CPA \u2014 I wanted to take other pro\u2019s temperature on this too. Thanks.", "replies": [], "depth": 2}], "depth": 1}]