5. What is the definition of “like-kind”?

The words "like-kind" refer to the nature of your use of the property, not it’s character, grade or quality. For example, real property is not of like kind to personal property because they are of a different nature and character. Conversely, vacant land, for example, is of like- kind to improved property as the two differ only in their grad/quality. Raw land, condominiums, single family residences, shopping centers, apartment buildings, farm and ranch land, commercial real estate, industrial property, second homes converted to investment property, and almost all other realty are of like-kind with respect to their intrinsic nature and character and may, therefore, be interchangeably exchanged. With limited exceptions, any real estate meeting the above tests can be exchanged for any other real estate. In addition, the rules excepting incidental property from the identification requirements should not be construed as meaning such property will be considered like- kind realty.

Remember, the final regulations for "Multi-Asset/Personal Property" exchanges provide for very narrow like-kind qualification of any non-realty business or investment property, which may be transferred together with real estate in your transactions. For example, any furniture, manufacturing or the equipment, autos, or artwork, etc. transferred in addition to real estate is not like kind to realty received as replacement property. The definition of realty is determined on a state by state basis within the United States, and any person wishing to exchange should determine the definition of realty according to the state or states where the relinquished and replacement properties are located.

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