I am thinking of investing in a development project that is estimated to take over 2 years. I will be a silent investor getting a cut of profits on the end sale of the residential development deal. I have read on various websites that you are not eligible for a 1031 if you are a developer planning to sell quickly. Does anyone have any information on this?
What you read is correct
Interesting question. We are developers and can say without a doubt you cannot 1031 a development as "it is in a primary line of business." However, as a "silent investor" it might be worth a look into. Most likely no, but maybe if the deal can be structured (ie through guaranteed vs. unguaranteed returns) as to allow an exchange for you the "investor".
In any case the money in a 1031 exchange must be reinvested within 180 days of the sale of the relinquished property, so your two year development timeline wouldn't work out easily.
Chris
palmetto75
That's an interesting comment and I'll look in to that. Can you explain the difference to me I have never heard of this before I'm quite new to this.