FAQ: Vacation Homes & 1031 Exchanges
1031 exchanges are common here on Maui, where many properties are second homes. The following is a summary of the guidelines for Exchanging a Vacation Home as part of a 1031 tax deferred exchange. The information outlined below is courtesy of Julie Bratton, of Old Republic Exchange Company.
IRS Guidance on Exchanging Vacation Homes:
Revenue Procedure 2008-16 Provides Safe Harbor
Revenue Procedure (“Rev. Proc.”) 2008-16 provides a safe harbor for exchanges of vacation homes (defined as “dwelling unit” in the Rev. Proc.). This ruling provides clear guidance of the circumstances under which the IRS will not challenge whether a vacation home will qualify as property “held for investment” under §1031.
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