Exchanging properties in and of itself is rather complicated. But exchanging a vacation home may be possible. For the uninitiated, Section 1031 of the Internal Revenue Code allows investors to sell a property, reinvest the proceeds in a new property and avoid all capital-gains taxes.

The regulation states “no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.” The term “like-kind” is often thought to mean that one type of property must be traded for the exact same property type, but that is incorrect. Any real property held for investment or used in a trade of business can be swapped for any other property held for investment or used in a trade or business. But the properties don’t have to be traded directly. Rather, in a 1031 exchange, you can sell a property to one person and buy another property from another person as long as both transactions occur within a specific time period and meet a bunch of other rules.

Looking for a home in Woodfield Country Club? Realtor® Caesar Parisi is ready to help you buy your dream property.

click here for article from the WSJ

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