Like-Kind Exchanges of Personal-Use Residences

Brad Borden, Washburn Law School
Alex Hamrick, Wachovia Bank, NA

Abstract

The law governing section 1031 exchanges of personal-use residences ranges from very explicit, in the case of principal residences, to very vague, in the case of mixed-use second homes. The law excludes from section 1031 nonrecognition exchanges of property used solely for personal use. The IRS has provided guidance regarding exchanges of mixed-use principal residences and has provided an all-or-nothing safe harbor with limited applicability for exchanges of mixed-use second homes. To complete the body of law governing exchanges of personal-use residences, this article suggests that the IRS should provide broader guidance for exchanges of mixed-use second homes.