Solomon C, Lao, CCIM.  Your Partner In Commercial Real Estate.


"Like-Kind" Property...

When an Exchanger is exchanging real property, "like-kind" is one of the advantages of §1031 exchanges. All real property is "like-kind" with all other real property. "Like-kind" refers to how the property is held by the investor, not the type or character of property. The Exchanger must have held the relinquished property for investment, or for "productive use in their trade or business," and intend to do the same with the replacement property. The following are examples of "like-kind" properties:

bulletResidential for commercial
bulletBank building for swamp land
bulletBare land for rental residential
bulletFee simple interest for 30-year leasehold
bulletSingle family rental for multi-family rental
bulletNon-income producing for income producing
bulletRental mountain cabin for a dental office in which the exchanger intends to practice

If the Exchanger is exchanging personal property the rules are far more restrictive. Definitions of what is considered real property and personal property can vary from state to state. It is essential to consult with a tax advisor when structuring personal property exchanges because one transaction may have multiple exchanges, involving tax deferral on both the personal and real property. Personal property is considered "like-kind" only if it appears in the same General Asset Class or Product Class. Therefore, the Exchanger may exchange:

bulletCorporate Twin-Engine Aircraft for a Corporate Jet
bulletDump truck for a dump truck
bulletGarbage routes for garbage routes
bulletTofu equipment for tofu equipment

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This web site was last updated on 07/16/09 16:04 .