Mr. Z owns three homes. He lives in the San Francisco home full time. The other two
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Mr. Z and his wife own the home outright. There is no mortgage on the property. They use the property occasionally. Last year they vacationed at the home for about two or three weeks - they aren't sure of the exact days. They have never rented the property and refuse to rent either the old or new property. They don't need the money and don't like strangers in their house. Mr. Z explains that he holds each of his vacation homes for two reasons. One reason is for vacations for him and his wife. Another key reason for owning the homes is for their investment value. He chooses homes only in areas where he believes there are high appreciation possibilities. Can Mr. Z take advantage of the tax-free exchange rules in the IRC? How will you advise him?
a. Do the Treasury regulations provide further guidance in this situation?
b. Do the Treasury regulations help to refine or add to the initial research question?
c. Do the regulations adequately address the research question? If so, what are your conclusions, and on what are they based?
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