1031 Exchanges Involving Agricultural Structures

Agricultural Structures 1031 Exchanges

Can you sell farmland and 1031 exchange into duplexes or residential homes? Does the IRS consider that to be a 1031 situation? 

That’s a good question and may require some more information. Ask yourself these questions:

  • What are the component parts of the relinquished farmland that will be sold?

  • Is it just raw unimproved land?

  • Are there special improvements such as agricultural structures to house, raise, and feed livestock or for storing agricultural materials or machinery and equipment?

Agricultural Structures

Sometimes there are agricultural structures that are designated as I.R.C. §1245 property (shorter depreciation life) such as irrigation systems, drainage tile, and other specialty improvements to farm real estate. If property with an I.R.C. §1245 depreciation recapture attribute is sold in an I.R.C. §1031 exchange, the I.R.C. §1245 depreciation recapture must be recognized to the extent that the new replacement property has insufficient I.R.C. §1245 property.

You can match up I.R.C. §1245 relinquished real property with new I.R.C. 1245 replacement real property, it just takes a little more planning and persistence in a 1031 exchange.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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