1031 exchange and principal residence

Dear 1031x.com: We have a 1031 house that we rented for 3 years and have been  remodeling for 1 year.  If we move into it this year, can we count the  past year of remodeling as a year of residence since it was not rented? We cannot give up our current house because we use it as a business  address and won't be able to have our business at the new house due to  restrictions, so if we do move over to the other house, can we still keep  our mailing address at the current residence and be able to prove that we  have moved actually to the new house?
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How do you prove that you are living at the new house to the IRS?  Is it  enough to transfer your homestead exemption and phone?  Thanks for any  advice you can offer.

 

Dear B. Brach:  The IRS says that you can only have one principal residence at a time.  It is generally the place where you spend more nights than any other place.  You cannot retroactively make a place your principal residence.  After you make a property your principal residence you must live there for two years in order to qualify for the full tax exemption under code section 121.  Let me know if you need more.  Sincerely, S.

Steve Hickox
Attorney / President

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