Summertime brings with it the "high season" for clients who are seriously considering purchasing vacation homes, or switching from one vacation home to another.The majority are looking to take advantage of certain tax breaks to help them carry the property. For others, tax savings are an added bonus to validate their decision. In either case, tax advisors often get a hurried call to explain the options.

While the basic tax rules on vacation homes have been kicking around for a while, it's surprising, based on new case law, how many aggressive variations are being tested each year. It also is eye-opening how many other taxpayers seem to misinterpret the basic principles. This article reviews the basics and variations for the tax practitioner, using a recent Tax Court decision as an anchor for the discussion.

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