Like-kind Exchanges are often misunderstood topic in 1031 Exchanges. As the market continues to improve it seems many Investors have the desire to Exchange into a different form of Real Estate Investment and this leads us to the question of what are like-kind?
WHAT IS LIKE-KIND?
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 LIKE-KIND PROPERTY?
Any property held for productive use in trade or business or for investment can be Exchanged for like-kind property. When exchanging Real Property the definition is very broad though Exchanges of “personal” property can be very tight.
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, chooses in action, interests in partnerships, certificates of trust or beneficial interest, other securities or evidences of indebtedness or interest .
More Information from the IRS: Like-Kind Exchanges Under IRC Code Section 1031
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