Can Water, Oil, Gas & Other Like Rights be Exchanged in a 1031?

oil and water 1031 exchange

Many people think of 1031 exchanges solely in the arena of fee-title where you own all of the bundle of rights. But in some instances taxpayers have more narrowly defined rights in the property such as just the water rights, mineral interests, or gravel rights. Here are some things you need to keep in mind when exchanging these types of like rights in a 1031.

Real Property Interests

These interests are typically considered real property interests in the state where the property is located. If that’s the case you can do a 1031 on that narrow property interest into other like-kind property (i.e. real estate).

The Advantage of 1031 Exchanging Like Rights

So 1031 exchanges can be a very advantageous way of disposing of oil rights, gas rights, etc. or other interests that are generally considered appurtenant to any estate in real property, but are sometimes severed or separately held estates in property.

  • 1031 Hotline: If you have questions about exchanging oil, gas, or water, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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