Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved. For example, an apartment building would generally be like-kind to another apartment building.
What type of property qualifies for like-kind exchange?
Qualified “Like-Kind” Property
- Raw land or farmland for improved real estate.
- Oil & gas royalties for a ranch.
- Fee simple interest in real estate for a 30-year leasehold or a Tenant-in-Common interest in real estate.
- Residential, Commercial, Industrial or Retail rental properties for any other real estate.
What is considered like-kind property in a 1031 exchange?
“Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land.
Can you use 1031 for land?
All forms of land are eligible for a 1031 exchange, even if it’s undeveloped. If a 1031 exchange is not set up before selling land, you will have to pay federal and state taxes on the difference between the cost of your raw land and the sale price.
Can you live in a 1031 property?
It can be rented to a family member as a principal residence so long as market rent is paid. Also, Section 121 has a special rule for 1031 property that states that you have to own the home for at least 5 years (either as 1031 property or principal residence) before you sell it.
Can you 1031 a personal residence?
Normally the IRS does not allow you to conduct a 1031 exchange with your primary residence. That’s because the home that you live in isn’t being used as an investment property or being held for business purposes. Instead, your primary residence is used to provide shelter for your family.
Can I buy land with a 1031 exchange?
Yes, all forms of land, including undeveloped land, are eligible for a 1031 exchange. However, if you plan to buy a vacant lot, develop it, and benefit from its sale after a tax-deferred exchange, then it is not eligible.
What is the definition of like kind property?
A like-kind property refers to two assets that are considered to be the same type, making an exchange between them tax deferrable. The two assets must be of the same type but do not need to be of the same quality to qualify as like-kind property.
What is exchange of like kind property?
The exchange of real estate for real estate, is an exchange of like-kind property. For example, the exchange of land improved with an apartment building for land improved with a store building is a like-kind exchange.
What is like kind exchange in real estate?
A like-kind exchange is the same thing as a 1031 exchange. It refers to the exchange of similar types of property, or “like-kind” property. For example, the exchange of one building (real property) for another building (also real property).
What is the definition of like kind?
Definition of Like-Kind Real Estate. Income Revenue Code 1031(a) defines like-kind properties as those that have been held for productive use in a business or trade or as an investment. Like-kind, as used in this code, means a property that is similar in nature or character, regardless of differences in grade or quality.
