Despite a recently issued safe harbor now available for like-kind exchanges of vacation properties, the Internal Revenue Service continues to keep taxpayers guessing on the precise boundaries of the law itself.Last September, the Government Accountability Office came out with a critical report on like-kind exchanges in which it complained that the IRS needed to give taxpayers more guidance on like-kind exchanges of second homes and vacation retreats. The GAO claimed that the IRS had agreed with its findings and had promised to release more specific guidance. The latest IRS response seems to fall short of that commitment.
The IRS’s response, in the form of Rev. Proc. 2008-16, contains an extremely rigorous, Code Sec. 280A-based safe harbor rule that will continue to keep taxpayers wondering what limits have actually been set.
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