Can a 1031 Exchange Fund Your Sun Valley Vacation Home?

Are you a landlord looking to move out of your current market?
Do you have an income property or commercial property? You may be able to exchange that property for a vacation rental in Sun Valley, Idaho!
- Your new vacation home will need to be primarily used as a rental for 3 years to satisfy requirements for a 1031 exchange.

Can I use a 1031 Exchange for a Vacation Home I have owned for Years?

If you purchased a vacation home 10, 20 or even 30 years ago, the ideas of selling and paying all those capital gains is overwhelming. If you could stop using the property for two years (except for 14 days in each of those two years) and rent the property for just 14 days in each of those two years, you could avoid capital gains taxes.

What Is A 1031 Exchange?

A 1031 exchange is a swap of one real estate investment property for another that allows capital gains to be deferred. An exchange can only be made with like-kind properties, and Internal Revenue Services (IRS) rules limit its use with vacation properties.

What Qualifies For A 1031 Exchange?

To qualify, most exchanges must merely be of like-kind—an enigmatic phrase that doesn’t mean what you think it means. You can exchange an apartment building for raw land or a ranch for a strip mall. The rules are surprisingly liberal.

Here Are Some Exchange Examples:

If you own a commercial property in Seattle, you could exchange it for a vacation rental in Sun Valley, Idaho.
A. If you own a rental home in California, you could exchange it for an income property in Sun Valley, Idaho
B. You own a business in the United States, you can exchange for a vacation rental condo in Ketchum, Idaho.

Can I 1031 Exchange For A Vacation Home?

Taxpayers can turn an investment property into a vacation rental properties via a 1031 exchange. If you rent your Sun Valley or Ketchum vacation home, and conduct yourself in a businesslike way, you will be able to avoid capital gains tax on your sale of an investment property.

Do I Have To Rent My Vacation Home?

To comply with the IRS rules of a 1031 exchange you will have to rent your new Ketchum or Sun Valley vacation home.

In each of the two 12-month periods immediately after the exchange:

You must rent the dwelling unit to another person for a fair rental for 14 days or more.
Your personal use of the dwelling unit cannot exceed the greater of 14 days or 10% of the number of days during the 12-month period that the dwelling unit is rented at a fair rental.