Ask an expert - 1031 rule applies in certain cases | Orlando Sentinel

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1031 rule applies in certain cases

Posted November 5, 2006

Q: I own a lot, which I plan to sell in 2007. I wish to avoid paying capital gains, so I'm planning to buy a villa or condo, in a 1031 Like-Kind Exchange.

I plan to occupy the villa/condo two to three months of the year and rent it out the rest of the year. It will not be my primary residence.

With this scenario, could I qualify for a 1031 exchange?

G.L., The Villages

A: Taxpayers must have held the property for use in a trade or business or for investment. Personal residences do not qualify for a section 1031 exchange.

Vacation homes may qualify as investment property if the taxpayer's personal use is limited or the home is rented.

The Internal Revenue Service states that a dwelling is considered a personal home if, during the tax year, you use it for personal purposes for more than the greater of: 14 days or 10 percent of the total days it is rented to others at a fair rental price...