Second Home or Vacation Home

As a general rule, a taxpayer’s second home or vacation home does not qualify for 1031 exchange treatment since “personal use” property does not meet the held for investment or held for use in a productive trade or business requirement. Also, the taxpayer will not be eligible for the personal residence exclusion under IRS Code Section 121 as noted above.

A property is generally considered to be a second home if the taxpayer uses the property for personal purposes for a number of days which exceed the greater of 14 days or 10% of the number of days during the year for which the property is rented at a fair market value.

However, a facts–and-circumstances analysis may reveal that a second home or vacation home has been held for investment in satisfaction of the qualified use requirement, and this investment intent may indeed outweigh the taxpayer’s personal use. The facts and circumstances particular to the taxpayer’s treatment of the property are critical to this “held for” analysis.

Strategic 1031 Exchange Advisors, LLC, a Georgia limited liability company, is a qualified intermediary for 1031 exchanges only. It is not an accounting firm, law firm or registered investment professional and therefore is not qualified to give accounting, tax, legal or investment advice, and, further, cannot act in an agency capacity on behalf of its clients. This website is for informational purposes only and does not and is not intended to constitute accounting, tax, legal or investment advice. We advise you to consult with your accountant, attorney and investment professional on all matters related to your exchange.