Is the "Year-and-a-Day" rule The Law...?

Is the "Year-and-a-Day" rule The Law?

Recently, we encountered a great deal of confusion and consternation concerning a 1031 exchange, and the so-called "year-and-a-day" rule. You've probably heard that you should hold both your Old Property and your New Property for at least a year-and-a-day before and after a 1031 Exchange.

However (and this is a HUGE "however") THE YEAR-AND-A-DAY "RULE" IS NOT THE LAW. Nowhere in Section 1031, the regulations, tax court decisions, or any other official authority will you find any mention of a "year-and-a-day" rule! The year-and-a-day rule is really a guideline -- though a sound guideline.

In the May 2005 edition of The AZREIA Advantage, and in a future edition of The Colorado Real Estate Journal, we explain in greater detail the "Year-and-a-Day" rule as it relates to what the law really says: that when you purchase either your Old or New Property, if you did not have a then-present intent to resell the property, your 1031 Exchange can survive IRS scrutiny even if you held the property for less than one year.

The “Year-and-a-Day” rule is great advice, but it is not The Law.

--The Experts