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1. What is a tax deferred exchange?

Section 1031 of the Internal Revenue Code provides that no gain or loss is recognized if property "held for productive use in a trade or business or for investment" is traded solely for the "like-kind" property that also is to … Continue reading

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2. What are the advantages of a 1031 exchange?

The primary advantage of exchanging under I.R.C. Section 1031 is the preservation of working capital. If you sell property you must pay taxes on any recognized gain. These funds will no longer be available to you for investment. The capital … Continue reading

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3. When do I have to pay the deferred tax?

If and when you elect to sell, as opposed to exchange, your replacement property, then the deferred gain will become taxable. With proper planning, you may defer the tax for your entire investment career.

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4. What kind of Real Estate qualifies for a 1031 exchange?

Generally, all real property is "like-kind" to all other real property within the US. Like kind property is property which is not identified as your personal residence or second home, and was not acquired for resale or considered inventory or … Continue reading

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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. … Continue reading

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6. What does “held for investment or productive use” mean?

Since the Code does not clearly define the term "held for productive use in a trade or business or for investment," the definition is subject to interpretation and has given rise to great uncertainty. Unproductive real estate that is "held … Continue reading

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7. Is there any property that may not be traded under IRC Section 1031?

Yes. The following property is specifically excluded under I.R.C. Section 1031 and therefore cannot be of "like-kind": Stock in trade or other property held primarily for sale Stocks, Bonds, Notes or other Securities or Evidence of Indebtedness or Interest Interests … Continue reading

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8. Can I exchange my principle residence under IRC Section 1031?

No. Personal residences are subject to their own special rules, and cannot be exchanged under I.R.C. Section 1031.

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9. What are some examples of property that may not qualify for exchange?

In addition to the non-qualifying property previously discussed, examples of property which probably will not meet the qualified use test are: Land which was acquired for the express purpose of subdivision and resale and was only held long enough to … Continue reading

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10. Can foreign property be exchanged?

As a result of the Revenue Reconciliation Act of 1989, real property within the United States and real property located outside of the United States are no longer of like kind. However, foreign property may still be exchanged for other … Continue reading

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