Note: With the passage of the Tax Cuts & Jobs Act of 2017, 1031 exchanges of personal property are no longer valid.
Farm machinery and equipment holds its value, which can result in heavy and unforeseen taxation when selling. Before you sell your farm equipment, be sure to contact our office to see if you can defer your taxes with a 1031 exchange.
Agricultural 1031 Exchange
You want the transaction to be treated as a trade or exchange (rather than a taxable-sale and repurchase) to be sure that you qualify for the maximum tax-savings.
Your exchange has to be of like-kind (or in this case like-class) property. Non real estate (personal property) used in a farming-business is listed in one single product class.
Farmers have an incredible advantage because nearly all of their equipment is grouped under just one product class, which allows them a great deal of flexibility in selecting their like-kind replacement property (within that product class).
This NAICS Product Class 333111 includes:
- Presses: farm-type, manufacturing
- Rakes: hay, manufacturing
- Rotary: hoes, tillers, farm-type, manufacturing
- Seeders: farm-type, manufacturing
- Shears: powered, for use on animals, manufacturing
- Sheep: shears, powered, manufacturing
- Shredders: farm-type, manufacturing
- Sod: harvesting machines manufacturing
- Sprayers and dusters: farm-type, manufacturing
- Spreaders: farm-type, manufacturing
- Stalk: choppers (i.e., shredders) manufacturing
- Tobacco: harvester machines manufacturing
- Tomato: harvesting machines manufacturing
- Tractors, and attachments: farm-type, manufacturing
- Transplanters: farm-type, manufacturing
- Tree: shakers (e.g., citrus, nut, soft fruit) manufacturing
- Wagons: farm-type, manufacturing
- Weeding machines: farm-type, manufacturing
- Windmills: farm-type, manufacturing
The sale of farm equipment can be very costly for farmers if they do not structure their sale properly. However, by using a personal property exchange, the sale can be treated as an exchange that is not taxable.
Minnesota Qualified Intermediary Services
The Minnesota qualified intermediaries at CPEC1031 have decades of experience facilitating 1031 exchanges in the Twin Cities and throughout Minnesota. Call us today to talk about how you can save money with a 1031 exchange - 612.643.1031.