As one of the most popular vacation-home markets, Myrtle Beach real estate investors will benefit from a recently-issued IRS document...
It used to be that nobody was really sure whether a vacation home would qualify as "investment property" under IRS rules governing §1031 tax-deferred exchanges. But, last month the IRS completely eliminated that uncertainty by clarifying under what circumstances one of the most popular forms of Myrtle Beach real estate - your vacation home - will be considered "held for investment" and qualify for a tax-deferred exchange.
If you already own a vacation home in Myrtle Beach, you must have owned the property for at least two years immediately preceeding the exchange (the "qualifying use period") and in each of the two twelve-month periods, you must have rented out the home for at least 14 days or more, at fair value, and your personal use must have been less than the number of days rented.
If you are considering purchasing Myrtle Beach real estate as a vacation home using tax-deferred exchange funds, you must own the home for at least two years after closing (the "qualifying use period") and within each of the 12-month periods, you must rent the home for at least 14 days or more, at fair value, and your personal use must be less than the greater of (1) 14 days, or (2) 10 percent of the number of days that your home was rented out. In other words, if you rent the property for 30 days, you can still use it for 14 days yourself, but if you rent it for 200 days, you can use it for up to 20 days without the IRS batting an eyelash.
As always, don't take my word for it. Consult with your tax professional before using the IRS tax code to your benefit!
-Richard Sander, Price & Company Sales Manager