SECOND HOME CAPITAL GAINS TAX

It can, but only if it is used predominantly for investment purposes rather than personal enjoyment, either inherently or by satisfying the safe harbor in Revenue Procedure 2008-16. A second home used almost entirely for the owner's own vacations generally does not qualify.

The property generally must be owned at least twenty-four months, rented at fair rental for at least fourteen days in each of the two twelve-month periods before the exchange, with personal use limited to the greater of fourteen days or ten percent of fair-rental days during that period.

Only if fair rental is actually paid. Rental to family or friends at below-market rates generally does not satisfy the fair rental requirement, and personal use by family members can, depending on the circumstances, be attributed back to the owner.

Without documented rental and personal-use history, an owner generally cannot rely on the Revenue Procedure 2008-16 safe harbor and would need to either delay an exchange until a full qualifying period can be documented, or accept greater audit risk relying on a facts-and-circumstances argument outside the safe harbor.

Yes. A replacement vacation property generally must satisfy the same twenty-four-month ownership, fourteen-day fair rental, and limited personal-use tests in the two twelve-month periods following the exchange for it to be respected as investment-use property.