My understanding is not partly because it's have to be for investment purposes and it'd be very difficult to make that case with DVC. The other issue is you really don't own real property with a non fixed unit/fixed week timeshare. You may want to email Dave McClintock this question, that's what I'd do if I had interest in the issue.
So far I have one contract in the works for BWV, and it does read that I am purchasing a fixed unit ownership -a deeded interest in a particular unit at BWV, so that looks like real property ownership to me, even though Disney lets you use the ownership as points.
The IRS probably wouldn't allow it, as it does conflict with "intent" purposes - intent has to be for investment use only, and Disney doesn't allow for that, unless they make an exemption for the 2 years needed. I have purchased properties through 1031 exchanges, that I rented out for several years, and then ended up having to move into them for some reason. I'll ask the DVC guide and just see what they say. Motivated sellers sometimes will make exceptions so am curious now if they would.
I'll let you know what I find out - most likely answer will be "NO".
Article on subject from Asset Preservation, Inc
A Leading National § 1031 Qualified Intermediary- DVC fits description of variation (b) below:
WHAT ABOUT A TIMESHARE?
There are generally two types of timeshares that can be purchased by a taxpayer:
a) The first variation was widely promoted in the 1970's and 1980's and generally consists of a right to use a type of unit at a particular location for a specified period of time. These are generally considered personal property and are not eligible for §1031 tax deferral.
b) The other variation has become more popular in the past 10-15 years and generally consists of a taxpayer purchasing legal title, not merely rights to use a property, to a specific unit for a specified period of time. This second variation is generally considered real property and may qualify for §1031 tax deferral.
Even if the timeshare owner has title to a real property interest, they should be able to support that the primary intent for holding the timeshare is for investment purposes. In Dewey vs. Commissioner, the IRS did not allow §1031 tax deferral because they determined the taxpayer's primary purpose for a two-week timeshare purchase was personal enjoyment and not for investment purposes.
As with any §1031 exchange, the taxpayer should be able to substantiate that the primary intent for holding the property was either for investment or business purposes.
Asset Preservation, Inc
A Leading National § 1031 Qualified Intermediary