FRACTIONAL OWNERSHIP OF A VACATION HOME UNDER THE TAX CUTS AND JOBS ACT

• Published in: Practical Tax Strategies 2021-07, Vol.107 (1), p.4-16
• Main Author: Cox, Sharon P
• Format: Article
• Language: English
• Subjects: Fractional interests; Home ownership; Joint tenancy; Property rights; Purchasing; Tax court decisions; Tax cuts; Taxpayers; Tenants; Vacation homes; Vacations
• ISSN: 1523-6250

Tax law regarding the treatment of sole ownership of a vacation home has been fairly stable since 1982, due to the Bolton' Tax Court decision, which provides the allocation method of certain expenses of a rental home. [...]with respect to disposition at death, the fractional interest in the property is transferred according to the owner's will or estate. Generally, taxpayers do not give near as much attention to the ownership structure as compared to the other aspects of acquiring the primary residence. [...]when the taxpayer is considering the purchase of a vacation home, the approach is to make the purchase as a sole owner or as tenants in common, as was the case with their primary residence. The taxpayer will pay only a fraction of the cost of the vacation home. [...]the taxpayer can be a fractional owner of a more desirable property than could be purchased as a sole owner or joint tenant.