Many people have questions about the like kind requirement in the realm of personal property in particular big ticket items like airplanes, heavy duty trucks, and other items that cost a lot of money but depreciate more rapidly than their actual decline in value.
A 1031 Example
So for example an airplane can be exchanged for another airplane but cannot be exchanged for a heavy duty truck or a boat or something that is dissimilar. Like-kind means that you look at the character of the property and determine if the character of the relinquished property is the same as the new replacement property.
Sometimes the lines get blurred. Consider the following cases:
- Is an SUV like kind to a car?
- Is a heavy duty general purpose truck like kind to a specialized crane truck or some other kind of heavy duty vehicle?
Every one of these cases is fact-specific. Generally an airplane can be exchanged for an airplane, a heavy duty truck can be exchanged for a heavy duty truck. The like-kind requirements in the realm of personal property are much more stringent than in other areas such as real estate where the like kind standard is much more broadly construed. That being said, you should always have a skilled qualified intermediary on your side who can look at these elements and provide you with information necessary for you to make sure you have satisfied the like-kind requirements in your 1031 exchange.
- 1031 Hotline: If you have questions about like kind and airplane exchanges, feel free to call me at 612-643-1031.
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