A newsletter I just received from a §1031 intermediary (in the San Francisco Bay Area) claims that a partial, or in some cases a full §1031 deferral is available when vacation property is sold. The writer claims the following:
(1) That if a vacation rental is used for less than the greater of 14 days or 10% of the days rented, that the personal use can be ignored, and the entire gain qualifies for a §1031 deferral.
(2) That if a vacation home is never rented and its personal use is limited to "incidental" use, that the entire gain qualifies for a §1031 deferral. The term "incidental" use was not defined in the newsletter, and I have not seen this term used in the Code or Regs regarding this issue.
(3) That if a vacation home is used for personal purposes 50% of the time and rented 50% of the time, that 50% of the gain qualifies for a §1031 deferral.
I wonder what you folks think about the above opinions.
The newsletter didn't discuss the following, but since it is a fairly common situation, I will add it here and solicit your opinions as to the availability of a §1031 deferral, and to what extent:
(4) A vacation home is used for personal purposes for, say, 21 days and rented for 70 days ... a total of 13 weeks, one-fourth of the year. What portion of the gain on sale, if any, would qualify for a §1031 deferral?
Related to some of the above usage possibilities is this question: Due to changing usage ratios from year-to-year, how many years prior to the sale of a vacation property should a taxpayer "look back" when figuring the personal use and rental (or investment) use. One year? Two? Five? The entire holding period?
(1) That if a vacation rental is used for less than the greater of 14 days or 10% of the days rented, that the personal use can be ignored, and the entire gain qualifies for a §1031 deferral.
(2) That if a vacation home is never rented and its personal use is limited to "incidental" use, that the entire gain qualifies for a §1031 deferral. The term "incidental" use was not defined in the newsletter, and I have not seen this term used in the Code or Regs regarding this issue.
(3) That if a vacation home is used for personal purposes 50% of the time and rented 50% of the time, that 50% of the gain qualifies for a §1031 deferral.
I wonder what you folks think about the above opinions.
The newsletter didn't discuss the following, but since it is a fairly common situation, I will add it here and solicit your opinions as to the availability of a §1031 deferral, and to what extent:
(4) A vacation home is used for personal purposes for, say, 21 days and rented for 70 days ... a total of 13 weeks, one-fourth of the year. What portion of the gain on sale, if any, would qualify for a §1031 deferral?
Related to some of the above usage possibilities is this question: Due to changing usage ratios from year-to-year, how many years prior to the sale of a vacation property should a taxpayer "look back" when figuring the personal use and rental (or investment) use. One year? Two? Five? The entire holding period?
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