Deferring the gain when you sell a US vacation rental

Real property only, held for business or investment

Three limits are packed into that sentence, and each one excludes a familiar situation.

Real property only. Furniture, appliances, linens, the hot tub, the golf cart — the personal property that makes a short-term rental function no longer rides along in a like-kind exchange. If your sale price includes a furnished turnkey package, the allocation between real property and everything else is a live issue, not paperwork.

Held for business or investment. This is the one that catches vacation rentals specifically. A property you also enjoy is a property with a personal-use story attached to it, and the character of the holding is the threshold question. Two owners with identical properties and identical income can be in different positions because one of them spent August there every year with the family.

Not held primarily for sale. The renovate-and-flip pattern is outside the provision by design. Holding period is evidence of intent, and short holds with immediate resale look like inventory.

Two clocks, and they start together

Both deadlines run from the same moment: the day you transfer the property you give up.

These are calendar days. Weekends and holidays are inside them. There is no provision for a deal that fell through on day 44.

What we would have in place before listing

• An honest personal-use history. Days used, by whom, at what rent, for each year of ownership. Assemble it from your own calendar before anyone asks for it.
• An allocation between real property and everything else, agreed with your advisor and reflected in the contract rather than settled afterwards.
• A shortlist of replacement properties before you sign, because 45 days is not a search period. It is a documentation period.
• Form 8824 on the return. The exchange is reported, not merely done.

Section 1031 rewards owners who decide to exchange before they decide to sell. If you hold short-term rentals in the United States and are weighing a sale — a mountain market, a coastal market, a city portfolio — tell us the properties, the approximate holding periods, and whether you have used any of them personally. We study every request and tell you honestly whether and how we can help, including when the honest answer is that this belongs with a CPA and a qualified intermediary before it belongs with a management conversation.