11th May, 2012

1031 Exchange Info for Breckenridge Second Homes & Vacation Properties

Summit County Colorado and Breckenridge home buyers may be interested in new guidelines issued by the Internal Revenue Service for 1031 exchanges.  Summit County real estate in Breckenridge and Blue River, Keystone, Frisco, Dillon, and Silverthorne may qualify for a Section 1031 Exchange if specific ownership and use requirements are met.  Please refer to IRS Revenue Procedure 2008-16.

Essentially, personal use of a second home or vacation property in Summit County is limited during the 24-month period after a 1031 exchange.  Buyers interested in Breckenridge CO homes, Keystone ski condos, and properties in our beautiful mountain communities may glean more helpful information below.

Safe Harbor Requirements

  • A vacation property or second home must be rented for a minimum of 14 days of each 12 month of 24 months before the sale or after the purchase of the property.
  • The taxpayer may not personally use the property more than 14 days a year or 10 percent of the days that the property is actually rented – whichever is greater.  This restriction continues for 24 months before and after the 1031 exchange.

Personal Use Restrictions

  • Personal use is used by the taxpayer or co-owner or tenant-in-common interest.
  • Persons involved may not trade places.  Any individual who uses the property under an arrangement enabling the taxpayer to use another property is prohibited.
  • The taxpayer’s family use is also considered personal use unless a family member pays their mark at value rent and lives in the home as a primary residence.
  • If the taxpayer rents the property to anyone else for less than fair market value is considered personal use.

Maintenance Days

  • Time spent by the taxpayer in the home used to repair, upkeep, or oversee a contractor working on the property does not count as personal use.  Proof of the work must be submitted.

Certified exchange specialist and CPA Mary Lou Schwab at Bankers Escrow Corp. offered a summary published in the Summit Daily News (04/20/12).

Come on up to see Summit County Colorado homes and condos for sale, those appropriate for the 1031.  For information about buying real estate in our mountain villages, call Barrie Stimson, Breckenridge Realtor® at (970) 390-2560.

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