A real estate property like a vacation home can and does produce significant tax consequences. When selling an asset of this kind at a price higher than its tax basis, you make a gain. Since your profits on the sale of the vacation home are high, you have capital gains tax obligation. This means that you will not get to enjoy the money you make. However, there is a clever way to avoid such consequences. You can defer capital gains tax by doing an IRS 1031 exchange. A 1031 exchange refers to trading a business or an investment without tax. There is no doubt that vacation homes qualify for this type of swipe.
How the IRS Policy Applies To Vacation Homes
The Internal Revenue Service says that vacation homes are eligible for a 1031 tax-deferred exchange. As long as the vacation home is used for rental purposes, it can be used to defer capital gains tax. Attention should be paid to the fact that if you hold half the property for personal use, only half of it can be used to reap tax benefits. If you use the entire vacation house for personal use, you have no chance whatsoever to complete a Section 1031 exchange.
To be eligible for the swap, you have to hold the real estate asset for at least 24 months prior to the exchange. What is more, you must have rented the property to another person for at least 2 weeks. Concerning the replacement property, you must keep it in your possession for at least 24 months after the trade. Yet again, you are required to rent out the real estate for at least 2 weeks at market rates.
What If The Property Is Used For Personal Use And Investment Purposes?
If you are using the vacation home for personal use and for investment purposes, your situation is more complicated. Whether or not you can complete an IRS 1031 exchange depends on how you are currently using the real estate asset. More precisely, it revolves around how much you use the vacation home for personal use. Using the property for personal use but to a limited extend may not necessarily disqualify your transaction. But taking into account the fact that incidental personal use is not clearly defined in the Internal Revenue Code, there is no way of knowing what the outcome may be. If you find yourself in a situation of this kind, get help from an expert.
Transforming a Vacation Home into an Investment Property
You can prepare in advance for the section 1031 exchange. To avoid unpleasant consequences, convert the vacation home into an investment property. What do you have to do? All you have to do is rent the property to another person at a fair price. Unquestionably, there are other measures you can take. Hire a property manager and keep the use of the vacation home to a minimum. If you do this, you will be able to enjoy the tax benefits offered by the IRS.
Business trips are often exhausting and stressful and those who need to travel internationally often know that eventually they take their toll on you. Even if the company handles all your expenses and you are allowed to stay in 5 star hotels, at some point you would be better off with the home experience. The good news is that there is something that can be done to make your stay more enjoyable and allow you to work better. There are luxury apartments to rent in London and Paris that offer the comfort of a home and the treats of a hotel such as fresh towels, bathroom products and so on. You would be staying in a uniquely decorated apartment, not in a standardized hotel room and enjoying the peace and quiet offered by a home.
What most people hate about hotels without even realizing it is the feeling of emptiness and depersonalization. You enter a room with classic furniture that has been emptied of any possible memory in an effort to satisfy the general public. Luxury Paris apartments are usually someone’s home who is away for a time and is willing to rent the apartment to someone else. You will stay in a place filled with personality, some personal belongings and a unique style. You will feel welcomed and immediately immersed into the culture of that city and that country. Even though you may be travelling to Paris for business purposes, you should also be experiencing the local culture and get to know how others live. These apartments are usually located in great neighborhoods and have wonderful views.
Both London and Paris are two of the most beautiful cities in the world and there is no reason why you should not enjoy them as much as possible, even if you are there for business reasons. You will feel more relaxed during you meetings, you will rest better during the evening and have more energ6y during the day. Your trips will not seem so bad after all and you might actually manage to take your family with you once in a while as well. An apartment certainly offers you more privacy and while you are at work, you spouse and your children could visit Paris or London and enjoy what these cities have to offer.
To conclude, if you want to make your business trips more pleasurable, you should look for apartments to rent in London or Paris as opposed to hotel rooms. Since these apartments can very well be in the areas your office is, you will have the convenience of being close to the office and the comfort of a home. The Paris apartments are great for those who want to travel with their families and if you choose to do this, you will manage to spend a little more time with your loved ones and offer them the chance to visit one fo the most beautiful cities in the world. Dedicated websites such as AvenueStory offer people a wide variety of apartments for rent to choose from, so you should not encounter any problems in finding the right place for you.