Whether you have (or would like to have) a vacation home on the ocean or at the lake or tucked away in the mountains somewhere, this ruling could be very significant for your future plans!
"The Internal Revenue Service recently issued a Revenue Procedure ruling that spells out how vacation properties can qualify for 1031 exchanges, which 
involve the exchange of investment properties. The guidance aims to clear up the debate about whether vacation homes are investment or personal use properties.
involve the exchange of investment properties. The guidance aims to clear up the debate about whether vacation homes are investment or personal use properties. The ruling states that the property must be held by the taxpayer for 24 months. The holding period is broken into 12-month blocks, and during each the property must be rented at the fair market rate for no less than 14 days. Additionally, the owner can use the property for 14 days or 10 percent of the days rented, whichever is greater, plus a 'reasonable' number of days devoted to maintenance tasks.
Because it is a safe harbor ruling, experts say failing to comply with all the rules does not mean the exchange will be denied or an audit will automatically occur. However, they underscore the importance of keeping good records of the property's rental history and the dates the property was occupied by the owner for maintenance." Source: Realty Times, Gary Gorman (03/06/08)
For the Realtor Magazine Online article: http://www.realtor.org/RMODaily.nsf/pages/News2008031003?OpenDocument
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