Real Estate for Vashon and Points Beyond

Tuesday, March 11, 2008

New Rules for 1031 Exchanges

Effective yesterday (March 10, 2008), tax-free exchanges are now possible on investment property that has been used partially for personal purposes. This falls under IRS Revenue Procedure 2008-16, with the stated purpose of "providing a safe harbor under which the Internal Revenue Service ... will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of § 1031 of the Internal Revenue Code." The procedure further states:

"In the interest of sound tax administration, this revenue procedure
provides taxpayers with a safe harbor under which a dwelling unit will qualify as property held for productive use in a trade or business or for investment under § 1031 even though a taxpayer occasionally uses the dwelling unit for personal purposes."

Check out the full Revenue Procedure on the IRS website:
http://www.irs.gov/pub/irs-drop/rp-08-16.pdf

Or, check out this story on the new rules on HeraldNet.com:
http://www.heraldnet.com/article/20080302/BIZ/261080917/1005

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