Tuesday, June 5, 2007

1031 Exchanges and Vacation Homes

There has certainly been some turmoil in the 1031 exchange business in Santa Barbara, and for that matter the country. Recently a ruling from the U.S. Tax Court has made it more difficult to use a vacation home as part of an exchange. Here is what the Court said "In a memo issued Wednesday, the court said that a Georgia couple's exchange of vacation homes did not qualify for the treatment according to Section 1031(a) of the tax code finding that the holding of any residence, even if motivated in part by an expectation that the property will appreciate in value, is insufficient to justify the classification of that property as being held for investment.
“The evidence overwhelmingly demonstrates that petitioners' primary purpose in acquiring and holding both the properties was to enjoy the use of those properties as vacation homes; i.e., as secondary, personal residences.” With Santa Barbara being a place having many second homes this is something we should all be aware of. If you have any questions regarding 1031 exchanges I can put you in touch with our exchange company.

2 comments:

Ricky Wong said...

Always thought that blogs can be a useful resource center if used correctly. Good job Greg!

Greg Knowles said...

Thanks Ricky, we shall see how it goes.

Greg

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