1031ExchangeAlliance.com

Certainly. Properties involved in an exchange need to be held for either productive use in trade or business or for investment. Holding land for its future appreciation would be considered held for investment.

You mention two years in conjunction with the word "personal". Therefore you are alluding to the Section 121 exemption on capital gains taxes on the sale of your personal or primary residence. You are correct in stating that a 1031 is useless for that scenario. Because you are covered by a different section of the tax code. Where 1031 is the "cat's meow" is when selling commercial or residential rental property. 1031 exchange is a tool to defer capital gaibs taxes indefinitely on the sale of rental property. Most investors fear selling rental property because they do not want to trigger capital gains taxes or depreciation recapture taxes.

As a general rule, no - a non-investment property is not eligible for a 1031 exchange.

Establishing qualified use for an investment property and making a property eligible for 1031 treatment is as mysterious as your username! In all seriousness, when a vacation home or second home becomes an investment property is a highly controversial subject in our field. Many attorneys lean towards the conservative 14-day rule where you can use a vacation home for 14 days or less per year (and rent it out for the rest or "hold it out for rent") without ruining your 1031 eligibility. In other words, vacation homes and 2nd homes NEVER qualify for 1031 treatment unless you can SUBSTANTIATE your INVESTMENT INTENT. Ways to substantiate your investment intent are by showing rental income for one year or more on your taxes OR showing it on the multiple-listing service for a fair market rent.

Remember, you have to have a QUALIFYING USE on both the RELINQUISHED AND REPLACEMENT SIDE of a 1031. So if it's a residential rental, count on renting it out on both sides!

I urge you to read my blog entry on the 3 buckets of real estate. Your vacation home should be appropriately placed in the investment property bucket before trying to cram it into a 1031 exchange. The blog entry is:

http://inside1031.com/blog/2006/09/30/t … al-estate/

Warmest regards,
James

P.S. There is SO MUCH silly information out there about 1031 that one leading expert says that a VACATION HOME can't be in a non-exotic area. Please do not listen to silly misinformers out there. Tax treatment is contingent on how you USE THE PROPERTY and HOLD IT OUT TO THE PUBLIC and nothing else.

The IRS does not allow extensions for either the 45-day period or the 180-day period.

If the exchangor’s 45th or 180th day falls on a weekend or holiday do I get the benefit of the following business day?
No. The IRS calculates this timeline based on calendar days. There are no extensions given.

The properties being exchanged must be of the same asset class. Like kind is defined in the tax code as meaning “similar in nature or character, notwithstanding differences in quality or grade”. All real property is considered like kind and must be held for investment or held for productive use in a trade or business.

Subdividing property will re-classify the land as “Dealer Property” which is not like-kind. The case on point is Margolis Vs. Comm. 337F2d 1001.

Under Internal Revenue Code (IRC) Section 1031, a real property owner can sell his property and then reinvest the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers. Often overlooked, a 1031 exchange is considered one of the best-kept secrets in the Internal Revenue Code.