To qualify for a tax deferred exchange under IRC 1031, both the relinquished and the replacement properties must be held by the Exchanger for investment purposes or for “productive use in their trade or business”.  The Exchanger’s purpose and intent in holding the property, rather than the type of property, is the critical issue.  The use of property by the other parties to the exchange (buyer and/or seller) is irrelevant.  The following are examples of qualifying properties:

	Bare land;
	Commercial rental;
	Industrial property;
	30-year leasehold interest;
	Farmer’s farm;
	Residential rental;
	Doctor’s own office; and
	Percentage interest in investment property.

It is important to note that the intent by the Exchanger to hold the property for personal use will prevent the property from qualifying for exchange treatment.  Therefore, second homes will not qualify for tax deferred exchange treatment unless the taxpayer changes how they treat or use the second home.  For example, a taxpayer could “convert” their second home to a valid exchange property and establish this intent by properly renting the property and holding it as a legitimate rental property.  However, the taxpayer cannot just simply rent the taxpayer’s residence and expect it to automatically qualify for exchange treatment.  Many taxpayers own vacation homes, which are rented out during the time when the taxpayer is not using the home.  Even though IRC Section 280A states that a vacation home may have a portion of its deductions disallowed if it is used for personal purposes under the “14-day rule”, an Exchanger can argue that if the vacation home is partially used in a trade or business (renting it), the vacation home should be eligible for tax deferred exchange treatment upon its sale.  However, there may need to be a bifurcation of uses as is also required for a home office use in a personal residence.