Leavenworth Real Estate
Archive for the 'Leavenworth Vacation Homes' Category
This article about using your vacation home or Leavenworth condo in 1031 tax exchange was provided by Ann Mclaren of LandAmerica 1031 Exchange Services. I have been fortunate to take a 1031 class from Ann in the past and I welcome anyone to contact her directly for more details on 1031 exchanges. She can be reached at (866) 962-1031. I hope to have more articles from her in the future.
A vacation home or second home held for personal use, solely for personal enjoyment, is not eligible for 1031 exchange treatment. However, a vacation home that is rented out at fair market value and is never used by the owner or his family is clearly eligible for 1031 exchange treatment. Most vacation properties fall somewhere between these two extremes, with some personal use and some rental use. Until recently, there has little binding guidance on the exchange of vacation properties in 1031 exchanges.
Revenue Procedure 2008-16, which is effective on exchanges occurring on or after March 10, 2008, provides safe harbor rules for vacation homes and properties converted to or from personal residences. If the safe harbor guidelines are met, the IRS will not challenge whether the property qualifies as property held for productive use in a trade business or for investment under Section 1031.
A vacation home or second home that you are selling and/or purchasing in a 1031 exchange will qualify for safe harbor tax-deferred treatment if:
1) The relinquished property is owned by you for at least 24 months immediately before the exchange and the replacement property is held by you for at least 24 month immediately after the exchange.
2) The dwelling unit is rented out at fair market value to another person for 14 days or more for each of the two years immediately before the exchange for relinquished property or two years immediately after the exchange for replacement property.
3) Your personal use is limited to the greater of 14 days per year, or 10 percent of the number of days of the year that the property is rented at fair market value, for two years prior to or after the exchange. You may use the property some additional days for repairs and annual maintenance, but must be prepared to prove actual work done.
Personal use is defined as being used by you, any family member, or anyone who has an interest in your property, such as a tenant in common, or by any arrangement where fair market rent is not paid. You may rent your property to a family member if they use it as a principal residence (not as a vacation home) and pay fair market rent.
Under these safe harbor guidelines you may sell, exchange, or move into your replacement property after you have met the requirements for the first 24 months. 1031 exchanges of vacation properties or second homes that do not follow the safe harbor guidelines in Revenue Procedure 2008-16 may still qualify for 1031 exchange treatment outside of these parameters, but you should be prepared for increased scrutiny by the IRS.
Ann Mclaren, Vice President
LandAmerica 1031 Exchange Services
Do you own a cabin on Lake Wenatchee near Leavenworth? It doesn’t matter if your home is on North Shore or Cedar Brae, demand for lakefront homes on Lake Wenatchee (or Fish Lake) remains at an all time high. There is only one home for sale on Lake Wenatchee today.
Own a vacation rental in Chiwawa River Pines? Do you have a cabin there that you have been thinking about renting out when your family isn’t using it?
Al over at NCW Real Estate Blog reports that the community is debating how to enforce a ban on vacation rentals and all other commercial ventures that have been a part of the neighborhoods.
No matter your opinion on the matter, if you own property in Chiwawa River Pines, you should plan on attending upcoming meetings of the neighborhood association.
I think that enforcing a ban on vacation rentals will have a negative impact on property values.
Buyers in the Leavenworth and Lake Wenatchee real estate market like the option of renting out their property even if they never use the option. Condos that can’t be rented out languish in our market. Homes in the city limits of Leavenworth don’t sell quickly for the same reason. I think a ban on vacation rentals in Chiwawa River Pines will only increase the property values in Ponderosa, where out of area buyers will turn their attention.
UPDATE March 20 – A date has been set for a community meeting for those who own homes and property in Chiwawa River Pines
A home at the Kahler Glen golf course near Lake Wenatchee was hit by an avalanche yesterday and carried 150 yards off its foundation according to the Wenatchee World. According to Lake Wenatchee sources, the home was located on Pelton Place which sits above Miracle Mile Road.
KIRO TV has the best photos of the avalanche damage and the home. They reported that a mandatory evacuation was in place for 15 nearby homes, due to avalanche danger and a buried propane tank that appeared to be leaking.
It doesn’t appear that anyone was in the home, but that it was a vacation rental that was scheduled to be occupied this weekend. A two person cleaning crew had been in the home earlier in the day. It sounds like a second home was also damaged by the avalanche.
The condos at Kahler Glen are outside of an area that might be effected by avalanches. However, Pelton Place, where this home was located, is on a steep slope backed by land owned by a large timber company. Local news media seem surprised by this avalanche, but last spring, a home on this road was hit by a giant mudslide doing tens if not hundreds of thousands of dollars worth of damage.
According to the Northwest Avalanche Center this is the seventh significant avalanche incident this winter. The NWAC had predicted high avalanche danger for Thursday and warned travellers to avoid backcountry areas.