Exchange appreciated LTR into an STR — defer cap gains, immediately unlock STR loophole + cost seg on new basis.
§1031 like-kind exchanges apply between all real property held for investment/business — long-term rental exchange into STR qualifies. Investor sells appreciated LTR, uses full proceeds within 180 days for STR, defers cap gains + depreciation recapture. On the replacement STR, immediately run cost seg + bonus depreciation to generate loss that (with material participation) offsets ordinary income. Timing: identify within 45 days; close within 180 days; use QI intermediary; watch boot rules.
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Short-Term Rentals (avg stay ≤7 days) are NOT rental activities under §469 — material participation alone unlocks non-passive losses.
Cost seg study reclassifies 20–35% of STR building basis to 5/7/15-yr property — 60% bonus (2024) = massive year-1 loss.
The Augusta Rule: rent your primary residence to your own business up to 14 days/yr at market rate — 100% deductible to biz, tax-free to you.
Keep personal use under 14 days OR 10% of rental days to preserve STR loss deductibility; over triggers vacation-home rules.
STRs providing hotel-like services (daily cleaning, meals, transport) move to Schedule C — SE tax + QBI eligible.
Airbnb/VRBO often collect + remit TOT for you — exclude from gross rental income; save on state income tax base.
Lease a unit long-term ($2K/mo), furnish, list as STR for $5K/mo — no property purchase required.
Combine §280A(g) 14-day rental + STR cost seg + material participation for cascade of tax benefits on same property.