New Guidance on exchanges of Vacation Homes

Just issued, hot of the press, is a new IRS Revenue Procedure (Rev Proc 2008-16) providing a safe harbor for exchanges of vacation homes held for investment purposes. This has long been an area where guidance, for exchange purposes has been sought. So, this recent Procedure ruling is quite a hot topic around our office.

In order to qualify as a "held for investment" property under the Revenue Procedure safe harbor guidelines, the relinquished (vacation property sold in a 1031 exchange) and replacement property (vacation property purchased in an exchange) must meet three basic guidelines:

The property must be held for at least twenty four months before and after the exchange.

Within this 24 month period, the vacation home properties must meet meet the following requirements:

1) The vacation home must be rented to another person at fair market value for fourteen or more days, and;

2) Personal use must not exceed fourteen days or ten percent of the time the property is rented at fair market value.

To read more about this exciting (okay...we admit, we are easily excited...) IRS Revenue Procedure ruling and obtain a more complete discussion on this topic, please see Safe Harbor for Exchanges of Vacation Homes.

When you visit, be sure to look around for related information on primary and vacation property rules as they relate to 1031 exchanges.