1031 exchanges are most often used to defer capital gains taxes on the sale of real estate, but many people are unaware that section 1031 can also apply to items of personal property. When done correctly, you can defer your taxes on the sale of your personal property and keep your money compounding and building wealth in a continued investment. In this article, we are going to talk about three of the most common types of personal property exchanges under IRC section 1031.
Airplanes, helicopters, and other aircraft can be exchanged under section 1031. Remember that 1031 exchanges only apply to property that is held for investment or business purposes. That means an airplane used primarily for your own personal use would not qualify.
Business Equipment Exchanges
Are you a business owner looking to upgrade your business equipment? A 1031 exchange allows you to sell that old business equipment and upgrade to newer, better equipment for your business. Best of all – you get to defer your capital gains taxes on the sale.
Coins & Precious Metals Exchanges
Numismatic coins, buillion coins, and other precious metals can be exchanged under section 1031. The like-kind requirement is quite strict in this area, so you need to make sure you are exchanging like-kind for like-kind.
Remember the Rules
With any 1031 exchange, it’s important to remember the rules that need to be satisfied in order to complete a successful exchange. Personal property exchanges are often more complex than real estate exchanges because the like-kind requirement is much narrower when it comes to personal property. With real estate, you can exchange most real estate for most other real estate. When it comes to personal property you want to make sure that you’re exchanging within the same general asset class. So you can exchange an airplane for another airplane, but not for business equipment. It’s important to involve a qualified intermediary early in the process to avoid any potential pitfalls.
- 1031 Hotline: If you have questions about the different types of personal property exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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