Vacation-home owners: Think before exchanging

Tax savings available to a select few

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As popular as tax-free exchanges have become to investors and second-home buyers, facilitators are still facing the basic questions that were asked two decades ago. The Federation of Exchange Accommodators (FEA) is a national trade organization formed in 1989 to represent qualified intermediaries (QIs) and their primary legal and tax advisors who are directly involved in Section 1031 exchanges, sometimes known as Starker exchanges. At the recent FEA mid-year conference in Washington, D.C., attendees shared common challenges they faced regarding the 1031 exchange industry. Vacation homes topped the list, even though the Internal Revenue Code is clear on the rules that differentiate a vacation or second home from investment property. "Some business magazines and some Web sites have been giving information to consumers that is not correct," said Tom Oldfield, a Tacoma, Wash., attorney and partner in Olympic Exchange Accommodators who attended the D.C. conference. "It seems ...