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Exchange Property

Real & Personal Property

Virtually any property held for investment or for use in a trade or business is qualified for exchange and tax deferral under Section 1031. Real estate is by far the most exchanged property but other business property qualifies as well. There are some exceptions noted below.

For real estate, there are few restrictions on the types of property which can be exchanged. To defer taxation, an exchanger must exchange into “like kind” property. Like kind property has been broadly interpreted by the courts and now means virtually any kind of qualified real estate can be exchanged for any other real estate — a ranch for a condo; a shopping center for an office building; a duplex for an interest in an oil well.

Exchange Property

When personal property is exchanged, there are limitations on the property which qualifies as replacement property. The tax law segregates personal property into classes of property based upon a general asset classes established by the IRS or Standard Industrial Classification Codes. Replacement property must be in the same class as relinquished property.