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!

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.