Like-kind refers to the nature of the investment. Any type of investment property can be exchanged for another type, or like-kind investment property. For example, a single-family rental can be exchanged for a duplex, raw land for a shopping center, an office for apartments. Any combination works and provides Exchangors with great flexibility.
What Qualifies As 1031 Exchange Property?
Any property held for productive use in trade or business or for investment can be exchanged for like-kind property.
Definition of Like-Kind Property Per Tax Code
Nonrecognition of Gain or Loss From Exchanges Solely in Kind.
No gain or loss shall be recognized on the exchange of property held for productive use in trade or business or for
investment. This does not apply to any exchange of stock in trade or other property held primarily for sale, nor stocks,
bonds, notes, choses in action, interests in partnerships, certificates of trust or beneficial interest, other securities or
evidences of indebtedness or interest .
Ineligible 1031 Exchange Property
The following properties may not be exchanged using Section 1031: a personal residence (unless a portion of the
personal residence consists of business property), stock in trade, developed lots, property held for resale immediately
after acquisition or completion of improvements (speculation homes or fixer type properties that are not rented out or
held onto for a period of time before being sold), the good will of a business, and partnership interests. Second homes
may or may not qualify depending on the use and tax treatment.
