Like-Kind Exchanges of Cooperatives

1031 Exchange of Cooperatives

In a 1031 exchange, you have to buy and receive like-kind property within the exchange period. There are all kinds of different property that can be exchanged. Real property is probably the easiest and most broadly construed like-kind requirement, in that a farm is like-kind with an industrial building. All kinds of real estate can easily and readily be exchanged.

1031 Exchange of Cooperatives

Some assets, such as cooperatives raise an interesting question. In a cooperative you get a share of stock and typically a long-term lease. So is an interest in a cooperative like-kind to the sale of raw land?

You may have to delve into the local state law where the cooperative exists to see if it's treated at the state level as a real property interest, or as a personal property interest. It may go down to how that cooperative was formed at the very beginning of its creation. If the cooperative elects to be treated as personal property and taxed by the local taxing authority as personal property that could impact later acquisitions of it by persons wanting to do 1031 exchanges.

Local Laws

So particularly with cooperatives you want to look at the local laws and how that cooperative was created to determine if it is considered an interest in real estate, which would be like-kind to other real estate, or if it is treated more correctly as personal property which would not be like-kind.

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

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved