Tax Advantages of buying a RV Lot, Cabin, or Vacation Property with LakeShore Ventures


The following tools can be especially useful in todays challenging economy and make the dream of vacation property ownership easier to obtain!

1031 Exchanges

1031s are a tool anyone can use with any type of investment property. Commercial investors use it. Ag speculators use it. Raw land buyers use it. And for all those reasons, and many more, 1031s are one of the key factors keeping a fire lit under the land boom.

The 1031 Exchange is a much-used method for turning a little into a lot. Understanding how it works is critical to making the best use of this important investment tool. According to Bill Winke of The Land report.

Can you do a 1031 Exchange on Vacation Home?

Taxpayers wanting to defer taxes on a vacation home through a Section 1031 like-kind exchange have contended with incomplete guidelines for many years. A 1031 Exchange allows taxpayers to sell "business or investment" property and purchase replacement property within the current regulations and have the opportunity to defer or eliminate all the Federal and State Taxes. The current tax law will only allow you to use Section 1031 for assets "held" either "for use in a trade or business" or "for investment." Property that is held for personal use like a pure second home usually did not qualify. On February 15, 2008, the IRS released Revenue Procedure 2008-16.

The IRS has never given guidance on how to handle these dual properties that have both personal and investment use. Most vacation homes were rented, but no one knew how much personal use was allowed.

With Revenue Procedure 2008-16, the IRS will allow a vacation home to qualify for a Section 1031 exchange if the following conditions are met:

For the relinquished property

  • You have owned it at least 24 months before the exchange.
  • In each of the two 12-month periods prior to the exchange the property has been rented at fair value for 14 days or more.
  • The taxpayer's personal use of the property during the prior two 12-month periods doesn't exceed the greater of 14 days, or-10% of the number of days during the periods that the property is rented at a fair rental rate.
As with any 1031 exchange the replacement property must also qualify for business or investment property test. The new Revenue Procedure will allow the property to qualify for 1031 exchange if the property it is held for at least 24 months after the exchange. Also the personal use and rental for the two 12 subsequent 12 month periods meet same 14 day/10% test that hold for the property given up.

Please note that the Revenue Procedure is a just a Safe Harbor or guideline. The Safe Harbor means that if you follow these rules your exchange will not fall under IRS scrutiny. If you do not meet these rules exact it does not preclude your exchange from qualifying.

Written by Dave Owens

Self Directed IRA


With a self-directed IRA, you have the ability to take control of your retirement savings. A self-directed IRA is an Individual Retirement Account in which you call the shots, and you choose your own investments. By investing your IRA in real estate you have the ability to shelter you profits from taxes! Both rental income and appreciation of the property grows either tax-deferred or tax-free!

With these self-directed accounts you have the ability to invest in stocks, bonds, mutual funds, and special assets, such as vacation properties

One interesting and little-known opportunity is the ability to purchase land through a self-directed IRA. “Golden Opportunities in Real Estate for Savvy Investors” explains the process for using a self-directed IRA to buy any type of real estate.

With a self-directed IRA, you have the ability to take control of your retirement savings. A self-directed IRA is an Individual Retirement Account in which you call the shots, and you choose your own investments. By investing your IRA in real estate you have the ability to shelter you profits from taxes! Both rental income and appreciation of the property grows either tax-deferred or tax-free!

With these self-directed accounts you have the ability to invest in stocks, bonds, mutual funds, and special assets, such as vacation properties Once you have decided that you would like to make an investment in vacation property, the process of buying through your IRA is pretty simple:
  1. Create a self-directed IRA account (several companies offer this type of product)
  2. Liquidate funds from your current IRA or 401K and place the funds in your new self-directed IRA
  3. Purchase the land through your self-directed IRA
There are restrictions and accounting considerations. Please consult your accountant.