At Uncle Lucky Larry, we hold nothing back in our quest to assist families in achieving the remarkable feat of unlocking the power of generational wealth. We accomplish this by inviting families to invest in our unique private resort home, with the opportunities and potential that come with an investment of that kind. As far as vacation homes go, I consider ours to be quite a bit more special, for reasons we've gone into in past blog posts. Part of what makes Uncle Larry's vacation home investment special is that word 'investment.'
Much has been said and written about real estate as an engine of wealth creation.
ThirdHome is a premier luxury vacation home exchange club that lets members trade time in their second homes for stays at other high-end properties worldwide. Members deposit weeks in their vacation homes to earn "keys," which they use to book stays at other members' properties. A small fee covers the reservation management, making this a seamless way to enjoy global vacations without any cash transactions. This is a perfect system for families like those investing in our private resort homes, where four families share one contract per rental, splitting costs for just $250 (each) per night per family to create memories that will last a lifetime. Our rental contracts are for one week. Our LP owners can use 56,000 points per year to upgrade their family vacation to a superior property. Points never expire, and with Luxury Home Exchange, we earn the points when we post our available dates, even if nobody uses our place! Uncle Lucky Larry has been a member for 23 years!
The huge question is: Are these exchanges taxable? Let’s split it apart with helpful insights from tax law, IRS guidance, and relevant case law to bring clarity to our investors and vacation home enthusiasts.
Generally, trades with ThirdHome are not taxable when you use them for personal vacations. According to IRS rules, barter transactions are taxable only when they generate income. When you trade with ThirdHome, you're not generating income.
"IRS Topic No. 420, Bartering Income.
[Barter transactions] are taxable only when they generate income, requiring the fair market value of goods or services received to be reported.
Since trading with ThirdHome is not a business operation and is very much a personal use system, you don't have to report anything to the IRS when you trade with them. And as far as the IRS is concerned, you're not doing anything that's taxable.
For our Uncle Lucky Larry investors, this changes the game. Our private resort residences let families spend one week every year across eight magnificent homes or entertain 128 guests in a single week. And thanks to platforms like ThirdHome, you can trade those residences in exchanges that don't trigger income taxes. The stunning locales in which you might vacation, trading our homes—that's what we're really selling here, folks. Because these trades maximize the engaged value of your investment. And engaging this value is how you go about realizing your investment's worth.
Members of ThirdHome do not pay income taxes on the exchanges of their vacation homes for several basic reasons:
IRS Does Not Tax Personal Use Exchanges: The IRS does not tax exchanges of personal property unless they involve income from business or rental activity. Accordingly, when you exchange your home for a vacation in a foreign country, the IRS does not consider this a taxable event.
No Cash Transactions: The "keys" system is an internal club currency, not a taxable asset. This structure avoids the need to report fair market value as income.
Non-Commercial Nature: In contrast to leasing a property, ThirdHome exchanges are centered on the enjoyment of high-end vacations, not on the production of income. This fundamental distinction places them outside the IRS's taxable barter system.
This is a perfect fit for our family investors. Our resort is like a business that has someone in charge, and that person is us. We manage an on-site concierge staff, a Corporate Services of Nevada (CSN) team, and an entire outfit that sees to all the resort's day-to-day details and to all the resort's necessary business details, including lots of compliance stuff. So our family investors have little to worry about; they can promote the resort, enjoy a necessary tax-free business, and take on the extra qualifiers and paperwork that will benefit them tax-wise as Real Estate Professionals. (Please consult your CPA or Tax Attorney)
What Does Case Law Say?
Although there is no specific judicial precedent that speaks directly to home exchange clubs such as ThirdHome, general tax principles and related rulings shed some light.
Moore v. Commissioner (T.C. Memo 2007-134): This case clarified that properties held primarily for personal use, even with future investment potential, don’t qualify as investment properties for tax purposes. This supports the non-taxable status of ThirdHome exchanges, as they are personal use swaps, not business transactions.
IRS guidance on Section 1031 exchanges of vacation properties. These involve ownership transfers, not temporary use swaps. The IRS confirms that exchanges of properties for personal use are not taxable.
Courts have said that barter transactions are taxable only when they involve actions that generate income. That puts personal vacation swaps, like those on ThirdHome, well outside the taxable range.
These principles assure us that exchanges in ThirdHome are not likely to incur taxes, and that investors can rest easy knowing that they are not using the global trade of their resort time for direct personal benefit in a way that would make those trades taxable.
Even though exchanges through ThirdHome typically aren't taxable, there are aspects to remember:
Rent or Business Use: If you rent out your vacation home or use it for business (e.g., corporate retreats), you must report your income from renting and may be able to deduct some expenses. See IRS Topic No. 415, Renting Residential and Vacation Property. This is separate from ThirdHome exchanges.
Differences in State Taxes: Federal tax rules might not require personal use exchanges to be reported as income, but states have different laws. Consult a tax professional in your state to make sure you're following the law.
IRS Scrutiny: If the IRS sees commercial activity (for example, frequent exchanges that look like rentals), it may challenge the tax treatment. To minimize this risk, keep exchanges strictly for personal use.
At Uncle Lucky Larry, our Limited Partnership managed with Corporate Services of Nevada guarantees unfailing compliance, protecting your investments from legal and tax disputes and upholding the corporate veil.
We have designed our private resort home investment for maximum financial and lifestyle returns. Of our eight estates, each generating $2.7 million in annual revenue, only 384 contracts are sold each year. And even at that restricted level, our paid staff ensures the operation of the resort (negotiating with local government and overseeing contractors) so you can sell the resort, live in it part-time, and enjoy tax-free exchanges through platforms like ThirdHome.
When you become a Real Estate Professional by qualifying through active participation (for example, helping book appointments via our AI SaaS system), you can take advantage of additional tax benefits. These involve the ability to offset passive losses that figure into the taxable income equation. The Limited Partnership (LP) structure funded through a Self-Directed IRA (SDIRA) guarantees that the wealth created will last multiple generations. When you file a Joint Tax Return and your spouse qualifies as a Real Estate Professional, you save on taxes.
Tax-free vacation home swaps can generate tax-free personal use credits if done correctly. IRS guidance and court cases, including Moore v. Commissioner, cited by tax professors, suggest that unpaid credits (which is what you're doing if you only use your home in a swap and don't otherwise generate income) result in no taxable income, even if you think the home might be worth something.
Prepared to discover additional details concerning our eight secluded homes in the resort sector, wherein four clans apportion the expenses—ordering, in effect, a group-shared privation of costs—that make possible shared memories of breathtaking outdoor and equestrian escapades? Then surf over to uncleluckylarry.com, and in so doing, hatch a plot (with us.)
