Good Media! The I.R.S. will not challenge whether a secondary home qualifies for Section 1031 therapy if certain specified possession and use requirements are met. The I.R.S. introduced Revenue Method 2008-16 providing certain recommendations for a secure harbor vacation home 1031 exchange.
To meet the safe harbor requirements, a taxpayer, vacation property the 24 weeks ahead of the sale of their holiday house or the 24 weeks after the obtain of the holiday house as a 1031 substitute house must: Lease the home at fair market book for at the least 14 times during each 12 month period of the 24-month period. Limit personal use of the home all through each 12 month amount of the 24-month period never to surpass the more of: 14 times or 10 percent of how many times the home is leased at a reasonable market lease during all the two 12 month periods. The citizen or some other person who has a pastime in the vacation house including a tenant in accordance interest. Use by any individual that employs the house under an layout which allows the citizen to make use of several other property. For instance, trading vacation home use if a rental is priced for the use of such different home is known as particular use. Use by any member of the family of the taxpayer until the holiday home is leased out as a principal residence at a good market rent. Use by any other personal if rented for under good industry rent. Per the IRS, the “fair market rent” is founded on every one of the facts and conditions that exist when the hire contract is entered into, and all rights and obligations of the events to the hire agreement are taken into account.
Maintenance Days don’t count at particular use! Some taxpayer consumption is not regarded as personal use if the citizen is involved in repair, maintenance and annual maintenance on a considerably full time foundation for just about any day. The taxpayer must be prepared to prove that the specific work was performed