How would you like to sell your 1031 relinquished property in the United States and buy your replacement property in Ecuador, Belize, or Poland? Well, unfortunately the Internal Revenue Code says that foreign property is not like-kind to US property, so you can't exchange into these foreign countries. 1031 exchanges need to be for property within the United States.
1031 Exchanges in US Territories
However, what about the US territories, like the US Virgin Islands? There is scant authority in this area, but one private letter ruling authorized the exchange of US property into the US Virgin Islands (a territory of the United States) if the replacement property was to be income producing. This seems to be a higher threshold than the mere held for investment or business purposes requirement that's typically applied in 1031 exchange.
So it may be possible to conduct a like-kind exchange for property in the Virgin Islands or other US territories, but the requirements are much more strict, and certainly require the help of a qualified intermediary.
- 1031 Hotline: If you have questions about exchanging into the Virgin Islands or any of the other US territories give us a call, feel free to call me at 612-643-1031.
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