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The fundamental advantages of a tax deferred exchange may be utilized to diversify, consolidate or leverage your investment portfolio. With respect to real property, the broad definition of "like kind" provides investors with numerous options to accomplish their investment goals.
Properties that qualify for IRS Section 1031 treatment
IRS Section 1031 provides that in order to qualify for tax deferred treatment, the relinquished property must be exchanged for replacement property that is "like kind". "Like kind" means similar in nature and character notwithstanding differences in grade or quality. The fact that any real estate involved is improved or unimproved is not material as that fact relates only to the grade or quality of the property and not its kind or class. As such, raw land held for investment may be exchanged for single family rentals used for a trade or business or any combination of the following:
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 Single Family Rentals
Farms/Ranches
Office/Commercial
Motels/Hotels
Golf Courses |
Some Recreational Properties
Multi Family Rentals
Raw Land
Retail/Industrial
Leasehold Interest of 30 years or more |
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While the definition of "like kind" is stricter when it comes to personal property - investors may still take advantage of tax deferred treatment in an IRS Section 1031 Exchange in the sale of investment personal property. The personal property exchange can be utilized to relocate a business, to upgrade equipment, or to streamline production by replacing outdated technology and machinery with more efficient models.
"Like kind" personal property includes:
Livestock of the same sex
Automobiles for automobiles
Buses for buses
Corporate aircraft for corporate jet
Doctor practice for doctor practice
Manufacturing equipment for manufacturing equipment
Restaurant equipment for restaurant equipment
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