Many taxpayers want to know whether or not they can use a vacation home in a 1031 exchange of real estate. In this article, we are going to discuss some of the details surrounding using a vacation home in a section 1031 exchange.
Vacation Home Exchanges
Using vacation homes in 1031 exchanges is a tricky situation. Remember, in any 1031 exchange your property needs to be held for investment or business purposes. Property held primarily for personal use is not allowed in a 1031 exchange. Ultimately, when considering whether a property qualifies for 1031 treatment the IRS is concerned with how the taxpayer used the vacation home.
That does not mean that it’s impossible to exchange out of a vacation home. There is a safe harbor for vacation home exchanges that allows you to conduct an exchange as long as you meet certain benchmarks. Specifically, in the two years prior to exchanging the property, you need to have used the vacation home for 14 days or fewer, (or less than 10% of the time it was rented). Stay within these boundaries and you should be fine to do a 1031 exchange of your vacation home.
1031 Exchange Intermediaries in Minnesota
Our qualified intermediaries have been working with clients throughout Minnesota and across the country for twenty years. Working with a qualified intermediary is the safest way to ensure your 1031 exchange completes successfully. Your intermediary can answer any of your questions, guide you through the 1031 process, and advise you every step of the way. Contact us today at our downtown Minneapolis office to learn more about the like-kind exchange process and talk about your exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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