Why It's Important to Be Specific When Identifying 1031 Exchange Property

Airplane Personal Property Exchange

Note: This is a guest article written by one of our 1031 exchange officers, Kent Carlotto.

When you want to maximize the likelihood of completing your 1031 exchange successfully (and who doesn’t?), sometimes it's tempting to try to keep your options open by making your replacement property identification as general as possible. However, this can have a negative impact on your exchange

Identifying 1031 Property

The point of identification in a 1031 exchange is to clearly and unambiguously identify a specific property or properties to replace the relinquished property. In the event of an audit, one of the factors the IRS will look at is: “Did the exchangor receive substantially the same (specific) replacement property that was identified?” 

If your identification is too general, their answer to that question may be, “No,” leading to the exchange being disallowed.

This Property for That Property

So when identifying 1031 exchange property, rather than saying (for example), “I’m going to buy a helicopter and/or a fixed-wing aircraft,” you want to get as close as you can to, “I’m going to buy this helicopter and/or that fixed-wing aircraft.” 

Generally speaking, a vehicle can be unambiguously described using make, model, and year. You can make your identification that much more robust by including (depending on the type of vehicle) a serial number, VIN, wing number, or similar identifier.

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

Defer the tax. Maximize your gain.

 

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