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  • Holding Period – How Long is Long Enough? There is no hard and fast rule as to the length of time that a replacement property must be used for investment purposes following an exchange before it can be converted from investment use to personal use. Nor is there a fixed test as to how long the relinquished property must be held as an investment property and subsequent sale. The actual measuring stick is a “reasonable time”. In determining what constitutes a “reasonable time”, the courts look at the “intent” of the taxpayer at the time of the original purchase, its conversion and at the exchange, applying a “facts and circumstances” analysis to determine whether such investment “intent” is met. Tax advisors frequently recommend that taxpayers hold the replacement property for at least Two years after acquisition, and the relinquished property for at least two years prior to sale, but these time periods constitute no guarantees.Both related party transactions and new vacation home guidelines require a two year hold.