1031 Exchanges of Live Stock

1031 live stock exchanges

The IRS taxes income from the sale of breeding stock. However, your transfer of breeding stock can be treated as an exchange that is not taxable. This means your gain from an exchange of old breeding stock for new like-kind breeding stock is not going to be recognized. But you need to set up the proper arrangements with a qualified intermediary first, so that the transaction is treated as a trade or exchange rather than a sale and repurchase.

If done correctly, you will keep your hard earned profits working for you, rather than paying unnecessary taxes before they need to come due. Your gain will not be recognized (deferred indefinitely) until you sell or otherwise dispose of the property you receive. The best part is that you can continue to conduct exchange after exchange - continually deferring your gains over and over again.

Like-Kind & Livestock Gender

Breeding stock of different sexes are not considered to be like-kind property so make sure that the gender of your relinquished stock is the same sex as the replacement stock.

Properties are like-kind if they are of the same nature or character. For example, a grade-beef-cow is like-kind to a purebred-beef-cow.

Inventory or Stock in Trade

Livestock that you have held primarily for sale in the ordinary course of your business may not qualify for 1031 treatment, because this type of property is treated as Inventory or Stock in Trade.

Inventory or Stock in Trade is generally taxed at ordinary income tax rates and is not entitled to 1031 treatment. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not considered to be like-kind.

  • 1031 Hotline: If you have questions about 1031 exchanges of live stock, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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