Can You 1031 Exchange Livestock of Different Sexes?

 Livestock 1031 Exchange

Livestock that is held for use in one's stock or trade may be exchanged with a 1031 transaction. However, there are many rules and regulations that govern such an exchange. In this article, we are going to offer a few tips to keep in mind when exchanging livestock under section 1031. In particular, we will be discussing the rule surrounding the exchange of livestock of different sexes.

Livestock Held for Sale

Section 1031(e) provides that livestock of different sexes are not property of like kind. Livestock held “primarily for sale” in the ordinary course of business cannot be subject to 1031 treatment because this kind of property (“inventory” or one’s stock in trade or other property held primarily for sale) is categorically excluded under Section 1031 (a)(2)(A).  Stock in trade or other property held primarily for sale can’t be exchanged under 1031.

Same-Sex Livestock

Same-sex livestock not held for regular sale (such as breeding stock) may be exchanged if they are like kind. Under the current regulations, there is no clear guidance as to what constitutes like kind for livestock. However, experts have argued that a grade beef cow is probably like kind to a purebred registered beef cow because they differ only in grade or quality. Conversely, a dairy cow is probably not like kind to a beef cow because dairy and beef cows are entirely different types of livestock.

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

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved