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Swapping vacation homes easier under IRS rule

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Many investors are taking advantage of the like-kind exchange, which is authorized under Section 1031 of the Internal Revenue Code. These exchanges are commonly referred to as "Starker" exchanges. But if you own a vacation home, there has been a lot of confusion as to whether that property qualifies for the exchange. Indeed, back in September 2007, the Treasury Inspector General for Tax Administration (TIGTA) issued a scathing report about the lack of IRS oversight of the capital gains (or losses) deferred through this kind of exchange. The TIGTA report recommended that the IRS "must provide clear guidance to taxpayers regarding the rules and regulations governing like-kind exchanges with respect to second and vacation homes that were not used exclusively by owners." The inspector general expressed concerns that "the absence of clarification on this issue leaves unrebutted the sales pitch of like-kind exchange promoters who may encourage taxpayers to ...