Like-Kind Property Definition
Like-Kind Requirement - Replacement property acquired in an exchange must be "like-kind" to the property being sold (relinquished property). Like-kind means "similar in nature or character, notwithstanding differences in grade or quality." In order for the properties to qualify as "like-kind" they must be held for productive use in a trade or business or held for investment purposes and be located within the United States. Foreign property does not qualify. For example: raw land held for investment may be exchanged for single family rentals or any combination of the below examples:
* Single Family Rentals
* Farms/Ranches
* Offices
* Motels/Hotels
* Golf Courses
* Multi Family Rentals
* Raw Land
* Retail
* Industrial
* Leases of 30 years or more
Property Not Eligible Under 1031:
* Primary Residence
* Interest in Partnerships
* Foreign Property
* Money
* Stocks, Bonds, or Notes
* Stock in trade, inventory or other property held inherently for sale
Section 1031 of the Internal Revenue Code, Sec. 1031 [1986 Code]
1031 - Exchange of property held for productive use or investment
(a) Non-recognition of Gain or Loss from Exchanges Solely in Kind.
(1) IN GENERAL — No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.
(2) EXCEPTION — This subsection shall not apply to any exchange of — stock in trade or other property held primarily for sale
stocks, bonds, or notes
other securities or evidences of indebtedness or interest
interest in a partnership
certificates of trust or beneficial interests, or
closes in action.
(e) EXCHANGES OF LIVESTOCK OF DIFFERENT SEXES — for purposes of this section, livestock of different sexes are not property of a like-kind.
