Florida represents a strong 1031 exchange market for real property held for use in a business or investment. Atlas 1031 has long served clients, both domestic and non citizen, providing an Internal Revenue Service recognized tax deferral strategy in §1.1031 of the IRS code. Federal and—if applicable—state capital gains and recaptured depreciation taxes can be deferred when replacement property is acquired within 180 calendar days of the old property sale.
There are many strategic reasons for considering a 1031 exchange in Florida, one of which being that Florida ranks second to Alaska in the number of miles of coastline, followed by California, Hawaii, Louisiana and Texas. Vacation rentals and investment property abound along the Florida coastline and are a primary source of 1031 exchanges.
The typical 1031 exchange in Florida is a Delayed (Forward) exchange for a vacation rental, either a single family residential or condominium, with nearly a third reverse or improvement exchanges. Referrals are received from clients, lenders, attorneys, CPAs, title companies, Realtors and other Qualified Intermediaries. The majority of Florida 1031 exchanges are accommodated for individuals, married couples and trusts, with an average sales price of less than $400,000.
Our Certified Exchange Specialist on staff has provided 1031 exchange qualified intermediary services for professional advisers and their clients since 2003. Florida 1031 exchanges have represented the majority of our like-kind exchange activity with an office located in Naples and Orlando, Florida. Foreign individuals and companies also defer US federal capital gains taxes by following FIRPTA requirements when selling real estate. Atlas 1031 has substantial experience working with FIRPTA filings, assisting professional advisers and title companies in filing the appropriate documents to secure the withholding certificate.
Florida 1031 Exchange Property Types
The following list of 1031 exchange properties share similar intents and facts supporting the intent and follow the 1031 exchange rules. The intent is to hold the real property for investment or business use with facts such as holding times and minimal personal use—excluding inventory given inventory is not eligible for 1031 consideration—how the property is reported on federal tax returns and, for a vacation property, if it was rented or in a rental pool.
- Land
- Build on Land Already Owned
- Businesses
- Shopping Malls and Strip Centers
- Golf Courses & Practice Ranges
- Trailer Parks
- Self Storage Facilities
- Oil, Gas & Mineral Interests
- Water and Ditch Rights
- Parking Lots
- Condominiums
- Medical and Dental Practices
- Convenience Stores
- Commercial Buildings/Warehouses
- Vacation Homes
- Gas Stations
- Apartments
- Hotels and Motels
- Rental Properties
- Conservation Easements
- Communication Towers
- Nursing Homes
Florida Vacation Rental Property Hold Time
Revenue Procedure 2008-16 provides a bright line test and safe harbor for taxpayers given the old property is rented out for a minimum of 14 overnights in each of two years at fair market rent and the replacement property is also rented out for a minimum of 14 overnights in each of the two years. The safe harbor means the Internal Revenue Service (IRS) will not challenge whether the vacation property qualifies as property held for productive use under IRC § 1031.
Taxpayer’s personal use is not to exceed 14 overnights per year or 10 percent of the number of days during the 12-month period the property is rented at a fair rental. Those personal overnights attributed to time for repairs and annual maintenance are not a part of the 14 personal overnights. It is wise to be able to prove work was performed with receipts, invoices and time logs. The taxpayer should also secure evidence of fair market rent from a third party property management company to support rent charged should the IRS audit the 1031 exchange.
The safe harbor is not mandatory. Why not utilize the standards to avoid a fact and circumstance test that most vacation rentals would fail? Taxpayers who view holding their rental property “for investment” may be in for a surprise should their intent not qualify within the meaning of Section 1031. Abandoning personal use prior to the sale does not necessarily qualify for the safe harbor but is a first step towards the personal use quota. A second step is to rent to non-family for at least 14 overnights for each of two consecutive years prior to the 1031 exchange. Another option is to rent to a family member as their personal residence.
Florida Qualified Intermediary
If you are considering a 1031 exchange in Florida and are seeking an experienced and trustworthy Qualified Intermediary, Atlas 1031 provides accommodation services compliant with Internal Revenue Code Section 1031. Start your consultation below or call our office at 1-800-227-1031.
