Safe Harbor for Home Swaps

Revenue Procedure 2008-16 provides a method for section 1031 like-kind exchanges of homes that are rented out or otherwise held as income-producing properties but also used occasionally by taxpayers for personal purposes. Dwellings will be considered held for productive use in a trade or business or for investment if, in each year of the two years immediately before the exchange (relinquished property) and two years after (replacement property), the taxpayer owns the dwellings for the entire period and rents them at fair rental for at least 14 days, and the personal use in each of those years does not exceed the greater of 14 days or 10% of the number of days rented. The procedure is effective for exchanges on or after March 10, 2008.