Section 1031 is in the Internal Revenue Code so it’s applicable to all the states in the union. You can buy your replacement property in any part of the United States. So you can sell a relinquished property in Florida and buy a replacement property in Minnesota. Many people that are in high tax states (such as California and Minnesota) are intrigued by the concept of exchanging their property into low tax states like Florida and Texas.
It’s really advantageous to be able to move your equity to the most advantageous investment which may be in a completely different state. However, you can’t exchange outside the US because foreign property is not considered like kind to US property.
Can I Do a 1031 Exchange if I’m not a US Citizen?
The short answer is yes. If you own property in the United States, you are subject to the taxation in the jurisdiction where the property is located. The United States will want to collect taxes on the sale of your US property. If you’re a US taxpayer, you can do a 1031 exchange to defer that gain indefinitely.
The idea behind section 1031 is that you have to buy a like-kind investment that’s in the US – foreign property is not considered like kind to US property.
But foreign taxpayers can still avail themselves of the benefits of a 1031 exchange (for their US tax liability) just like any US citizen would.
- 1031 Hotline: If you have questions about exchanging property between different states or countries, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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