Tips for Identifying Personal Property in a 1031 Exchange

Gold Coin 1031 Exchange

Many people own property other than real estate that has appreciated in value such as artwork, coins, or other collectibles. They may not know that when they sell that property they're going to have a pretty significant tax on their profits or gains from the sale of the artwork, coins, or collectibles. A 1031 exchange can be used even for items of personal property that have been held for investment or business purposes.

Personal Property Exchange Example

For example a painting that's been held for business or investment purposes can be exchanged for other like-kind property. The question arises “what is like kind in the realm of personal property?”

  • Is a sculpture like kind to a painting?
  • Is a stamp like kind to a coin?

From my perspective, if the property feels like it's like-kind in that it serves the same purpose or function, then it very well could be like-kind.

The More Similarities The Better

So a painting could be exchanged for a painting. A coin that is numismatic could be exchanged for another numismatic coin of the same metal content. And a stamp could be exchanged for other stamps. On the flip side, a stamp would likely not be considered like-kind to gold coins.

The question comes down to what the IRS considers like-kind. The closer in similarity that the two properties are, the more likely they're going to agree that you've exchanged into a like-kind property.

  • 1031 Hotline: If you have questions about identifying personal property in a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

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