Can a vacation property qualify as an investment, meeting the guidelines for a 1031 exchange? Yes, but first let me say, as always, consult a tax advisor or attorney regarding your specfic situation. This blog is not meant to give legal or tax advice!

The IRS recently released a Revenue Procedure ruling that clarifies whether a vacation home qualifies for a 1031 tax deferred exchange.  To qualify, a property must be held for 24 months.  Each “holding period” is broken into 12 month blocks; during each block, the property must be rented at Fair Market Value for no less than 14 days. 

The owner can personally use the property for 14 days or 10% of the total days rented, whichever is greater.  The property can also be used by the homeowner for maintenance purposes.  Whatever you do, KEEP GOOD RECORDS! As a vacation property owner, keep track of the days during which you occupy the property for maintenance.  Also, keep records of the rental history. 

source: Realty Times Magazine