Monday, March 3, 2008

Safe Harbor for 1031 Exchanges of Vacation Homes

Rev. Proc. 2008-16: Safe Harbor for Exchanges of Vacation Homes and Conversions to or from Personal Residences.
This Internal Revenue Service revenue procedure provides a safe harbor. The IRS will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment under Section 1031. See Moore v. Commissioner, T.C. Memo, 2007-134, the vacation home case. See Treasurey Inspector General for Tax Administration report "Like King Exchanges Require Oversight to Ensure Taxpayer Compliance" Sept 17, 2007. More IRS guidance on vacation home exchanges.
However, this is just a safe harbor. An exchange may still fall outside the paramaters and meet statutory requirements, but you should expect heightened scrutiny. This safe harbor is effect for exchagnes ocurring on or after March 10. 2008.
Be careful with this and consult with a CPA or income tax professional or qualified attorney.
Posted by Harrison K. Long, Explore Properties Group, March 3, 2008
Explore Real Estate

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