Until recently, it has been unclear whether IRC Section 1031 applies to the “exchange” of vacation homes. In the absence of binding guidance, taxpayers often referred to a 1981 Private Letter Ruling (PLR) that seemed to indicate exchange treatment was available where the taxpayer had acquired both the relinquished property and replacement property in hopes of future appreciation.
The trouble began in 2007. The 1031 Tax Group LLC, a privately-held qualified intermediary based in Richmond, VA, filed for bankruptcy protection. Edward H. Okun is owner and sole “member” of the company. Additionally, 16 other subsidiary firms (in San Jose, Boston, Denver, San Antonio, Tampa and New York), each designated as qualified intermediaries, also sought bankruptcy protection in the filing.
Learn about how the year-end 1031 exchange works and what restrictions apply to exchangers.Under IRC §1031 individuals and businesses may exchange qualifying property for like-kind replacement property.Only property held for investment or for productive use in a trade or business qualifies for a like-kind exchange.Taxpayers need to be aware of all timing restrictions under Section 1031 of the Internal Revenue Code (IRC §1031).