Tax Court: No Like-Kind Exchanges on Dual-Purpose Residences

In an end of May ruling, the Tax Court asserted that investment homes are not eligible for like-kind exchange treatment (deferred gain or loss) unless they are strictly held for investment. Two Georgia taxpayers which held the houses primarily for investment but in part as vacation homes. The Court, after dealing with procedural issues, said that expectation of house appreciation, lack of present presence in the houses and fact that neither home was a primary residence were not sufficient.

The ruling certainly means that taxpayers must be careful in filing when a vacation home is sold at a gain and probably also means that trading of time-share interests are subject to taxable gain status.