What types of property qualify for a 1031 exchange?
Qualifying property would be property that is used for income (as in a rental),investment or used for business. Your personal residence does not qualify for 1031 exchange treatment, although it may qualify for IRS Section 121 Exemption treatment. Section 121 provides that a taxpayer may exclude gain realized on the sale or exchange of property if the property was owned and used as the taxpayer’s principal residence for a minimum of 2 years during the 5-year period ending on the date of the sale or exchange. There are limits to the exclusion, however and it is recommended that you check with your read the entire section at www.irs.gov and check with your tax professional for details.
Among the types of real property that are eligible for 1031 exchange treatment are vacant land, farm land, single-family homes, multi-family homes, hotels, factories, commercial buildings, shopping centers,30 year leases or longer, quarries and oil fields.
Basically any type of real estate may be traded for another type of real estate as long as it satisfies the qualified use test. Other types of property that may qualify for 1031 exchange include aircraft, automobiles, trucks, office equipment, furniture, machinery, computers, musical instruments, billboards, certain licenses, copyrights, collectibles and drilling equipment.
It is very important to check with your legal and tax advisor to determine whether your property will satisfy the requirements and like-kind tests, particularly in the areas of personal property.
What is a 1031 tax-deferred exchange
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