My FIL just sold his lake home that was used for vacations only and never lived in. His accountant told him that he could not roll it over into another vacation home or other property to avoid taxes. Is this true? Any suggestions?
lauralee,
I believe that you are referring to 1031 exchanges. If that is the case, then I have several comments to make regarding your question.
1) seek out technical tax expertise before doing a transaction that may or will have significant tax implications.
2) this investment may have been eligible for 1031 exchange, depending on the amount of personal use it got.
3) after the sale, it is likely too late to obtain 1031 treatment. In the case of 1031 transactions, in order to defer the gains, there is a very rule driven process that has to be followed and put in place before the sale occurs.
4) A 1031 exchange by itself will not avoid taxes...only defer them.
A simple reply can not cover the ins and outs, but the long and short of it is, if ever the transaction was qualified for 1031 exchange, it probably isn't now...
My advice, at the risk of being redundant, is to talk to your accountant before the transaction takes place, and if you are not convinced, seek out a specialist.
Better Luck next time!
Unless his sale falls through, your friend will have to pay the taxes at this point. To avoid it, he would have needed to rent it out for a period of time, thus delaying the sale. Look at the bright side, in this falling market he made money on the place....not a bad thing in a market where values are falling in many parts of the country.