1031 exchange can be used on second homes, vacation homes.

Can I use a 1031 exchange to sell my vacant land to buy a Lake home or condo?

The answer is yes.   If you are selling investment property to buy a Lake of the Ozarks home or condo as a rental, then you can complete this exchange with relative confidence it will be seen as a “Like-Kind” exchange by our friends at the IRS.  With appreciation rates from ten to thirty percent a year, low property tax and strong projected demand, why not get into this market?   

The replacement property must be equal or greater in price than the selling price of the relinquished property. Otherwise you will have to pay tax -- called "boot" -- on the difference between the two properties.  Also, you must identify a replacement property within 45 days and close on that property within 180 days to make this transaction valid.  A few other options exist where you could actually use the property with some personal use while it is a rental, giving you both a vacation home and a solid real estate investment. There is even a way creatively combining Internal Revenue Code (IRC) Sections 1031 and 121 to convert this property to your primary residence, live in the property for at least two years, and then take the principal residence exclusion and make the capital gains tax disappear forever!    

There are many other considerations, and some pitfalls along the way, so you need to work with an agent that is experienced with these types of transactions to make sure you don’t do anything to jeopardize your exchange.  For more information on 1031 exchanges for vacation homes, check out my site at www.1031taxsaver.com/Exchanging_20_Second_20_Homes.html