How Can I Use a 1031 Exchange to Stop Managing Property?

If you want to cease managing a property and withdraw from the business side of the real estate market, there are several potential solutions using a 1031 exchange.

First, you can relinquish the property and swap for a new property with a different designation.

Second, you could pay capital gains taxes on the current property, including depreciation recapture taxes. This method is more expensive given the extra taxes that must be paid.

Third, you could make the property your primary residence. This process is time consuming. To get designation as your primary residence, you must own the property for five years and live in it for two.

If you still want to be involved in the property market but just want to end your involvement with a particular real estate portfolio, you should consider the first solution and change the designation of the property. If you are not interested in staying involved with the property market at all, you could simply sell the property and pay the required taxes despite the expense.