Like-Kind Property Categories
All 1031 exchanges need to be for like-kind property.
Generally no gain or loss is recognized if you exchange property held for use in your trade or business or for investment for new business or investment property that is like-kind. However, if as part of the exchange transaction, you also receive non-like-kind property (Boot) such as cash, services, or differing property, gain must be recognized to the extent of this non-like-kind property received.
What is Like-Kind Property?
Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities, or evidence of indebtedness. Nor does Section 1031 apply to personal use property (i.e. second homes and family cars) used primarily for personal use rather than for use in your trade or business or for investment.
Real Property Exchanges
All U.S. real-properties (brick/mortar and land) are generally like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property located outside of the United States are not like-kind.
Minneapolis 1031 Exchange Company
To help you understand this process, take a look at this calculator that demonstrates that both the 45 day time-period and 180 day time-period run concurrently.
Contact us today in Minneapolis if you have questions about what constitutes like-kind property in a 1031 exchange 612.643.1031.