What is a like kind exchange of property?
A like-kind exchange is a tax-deferred transaction that allows for the disposal of an asset and the acquisition of another similar asset without generating a capital gains tax liability from the sale of the first asset.
What does like property mean in 1031 exchange?
Like-kind properties are real estate assets of a similar nature that can be exchanged without incurring any tax liability under Section 1031 of the Internal Tax Code. 1. Properties must be held for business or investment purposes but do not need to be similar in grade or quality.
What qualifies as a 1031 property?
As mentioned, a 1031 exchange is reserved for property held for productive use in a trade or business or for investment. This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence.
What is a like kind exchange example?
The IRS considers all “Investment Properties” to be “Like-Kind.” Properties do not need to be the same type. For example, raw land can be exchanged for an office building, a warehouse can be exchanged for NNN retail property, or a rental house for a Replacement Property Interest in a 300-unit apartment complex.
What type of property is eligible for like-kind exchange treatment?
For real property transactions (rental houses, farmland, office buildings, strip malls, etc.) the “like-kind” requirement does not mean selling and buying the exact same type of property. The term “like-kind” refers to the nature or character of the property not its grade or quality.
How does a 1033 exchange work?
1033 Exchange Timelines: Whereas a 1031 exchange requires an investor to identify and close on replacement property within 45 and 180 days, respectively, from the close of the relinquished property, the 1033 exchange typically gives clients anywhere from two to three years from the date of the eminent domain or other …
What are my options for a 1031 exchange?
Commercial property including rental properties, condominiums, shopping centers, strip malls, timberland, gas and water interests, and land represent real property eligible for a 1031 exchange. One of the popular examples of 1031 Exchange replacement properties include Delaware Statutory Trusts or DST properties.