Can I Buy a Timeshare With a 1031 Exchange?

Posted Nov 4, 2021


In a 1031 exchange, a tax-deferred exchange is done by selling an investment property and replacing it with another like-kind property. A timeshare is considered a personal-use property, which does not qualify for a tax-deferred exchange. 

However, there are some circumstances where a fractional ownership property, which is similar to a timeshare in some ways, can be used in a tax-deferred exchange. 

It is important to understand the difference between a fractional ownership property and a timeshare. In fractional ownership, a group of people purchase a piece of real estate and have ownership interest in the property by holding title. In a timeshare, the buyer purchases the right to use the property for a certain amount of time each year. 

In fractional ownership, there are very few times it will qualify in a 1031 exchange, but it might be possible in very specific circumstances. 

To qualify a property for a 1031 exchange the taxpayer, or exchanger, must show that they primarily use the property as an investment, not for personal use or enjoyment. 

When planning a 1031 exchange, it is important to meet with a legal or financial advisor to ensure that the qualifications are being met, especially in complex cases like timeshares and fractional ownership properties. 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits.

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