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The three tax categories, which impact taxpayer's decision to own second home, are examined.

The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, may have unforeseen indirect consequences for taxpayers with dwellings used for both short-term rental and personal purposes, [...]

Marsha Graham, a realtor licensed to sell in Alberta and B.C., lives primarily in Calgary but dreams of the day she can retire to live full-time in her Victoria inner [...]

The interaction of passive activity rules and the income limitation, most especially on loss carryovers and the tax consequences when the house is disposed, are considered the most overlooked aspect of vacation home, or second home, ownership. Concerns of owners on the tax aspects of ownership were triggered only when ownership of vacation homes significantly increased. Varied tax results suggest that a specific strategy employed during ownership is not necessarily the appropriate strategy that must be adopted during termination., The tremendous increase in ownership of so-called 'vacation homes' has led to an increased awareness of the importance of careful planning in regards to the tax aspects of such ownership. [...]

The allocation of interest and taxes for a vacation home that is also rental property has not been clarified in either the Tax Reform Act of 1986 or the legislative history of vacation property deduction limits. However, a recent Ninth Circuit Court of Appeals case, Bolton v. Commissioner, provides a method for allocating taxes and interest between rental and personal use that is consistent with preventing personal expense deductions. The formula used by the IRS, total days divided into rental days, is overly restrictive of rental expenses.

With the issuance of Rev. Proc. 2008-16, the Service has carved out a safe harbor for the exchange of vacation homes to qualify for Sec. 1031 treatment. The focus of [...]

Taxpayers contemplating the sale or transfer of their vacation homes can reduce or avoid the recognition of gain on the sale or transfer through careful tax planning. The tax treatment of the sale or transfer depends on the extent of the personal usage of the vacation home of the taxpayer, and can fall into four categories: all personal use, all rental and no personal use, rental for less than 15 days and personal use through the rest of the taxable year, and minimal personal use not to exceed a period of 14 days. Options available to taxpayers in order to achieve a lower tax include: avoiding a current sale for cash through an installment sale; using the property in a trade or business to affect a capital gains treatment for gains on the property; and postponing the sale in order to realize a favorable capital gains differential.

Sec. 280(A) of the IRS laws concerns rules governing the rental of vacation homes. A case is presented concerning a buyer of a vacation condominium in a resort community. The developer offered the buyer two lease arrangements, namely, the guaranteed lease and the 50% deal where the buyer would receive half of the rents collected by the developer with no guaranteed payment. The buyer chose the guaranteed lease option. The owner deducted the expenses on the condominium from his tax return. The IRS disallowed this in violation of Sec. 280A., Some condominium owners might be turning away from rental pools. Think of it. Palm trees swaying in balmy breezes. Or snow-covered trees beautifying the ski slopes you expect to conquer. [...]

The real property tax to be paid by owners of vacation homes depends on the extent of the owners' personal use of their properties. Thus, the tax paid by principal users of the house differ from that paid by homeowners who have their property rented or those who use their second home for more than 14 days each year. Homeowners must consult their accountants to find out which category they belong. Their accountants can also advise them on Tax Court and IRS regulations.

THOUSANDS of Britons with homes abroad face a new tax even if they do not rent out or visit their property. Simon Rees, senior manager of private clients for PricewaterhouseCoopers, [...]