Real property exchange

[Questionguy101]

If you sell an investment real property and use the proceeds to buy a rental real property, is it a 1031 like-kind exchange?

[Jesse]

I was going to reply no, but that is too short of an answer. If you directly receive the proceeds from the sale and just turn around and purchase the new property it is not a like kind exchange.

[Questionguy101]

Sorry, I have not make myself clear.

The deal was done with a qualified 1031 exchange company as the middleman.

The purpose of my question to ask whether an investment real property is considered like-kind property as a rental real property or not.

To put it in another way, if you sell an investment real property through a qualified 1031 exchanger and then the exchanger uses the proceeds to purchase a rental real property for you, is it a 1031 like-kide exchange?

[Jesse]

I believe the answer to that would be yes - it is a qualified 1031 exchange.
See if this link works for you: http://www.1031.org/about1031/

[OldJack]

yes.. real estate for real estate is broadly interpreted, and usually considered as like kind property. As an example in Quickfinder depreciation handbook "Unimproved bare land can be exchanged for an apartment complex". However, be careful about personal property included as it is not like-kind to real estate.

[S T]

More 1031 info

Here is another good source of info on 1031 exchanges https://www.1031cpas.com/1031%20literature.htm

Sandy

[wexeter]

LIke-Kind Replacement Property

Yes, absolutely.

As long as the property that you relinquished and the property that you acquired (replacement property) were held for investment, which would include held for income production (rental), held for capital appreciation (investment) or used in your business, ANY KIND of real estate qualifies as like-kind and would qualify for tax-deferred exchange treatment.

The only requirements is that it must be domestic real estate for domestic real estate or foreign real estate for foreign real estate held for investment.

[Corduroy Frog]

Purpose irrelevant

While so many are answering the question in the positive, is it safe to assume that "like-kind" attaches to the property itself, irrespective of purpose? I believe this is broadly interpreted for real estate, i.e. farmland for development land, business building for a rental building, etc.

I guess my question is does this same broad interpretation apply to things other than real property? For example, what about a Euclid truck used by its owner in construction but then traded to another owner who is an equipment dealer and uses it as inventory?

[jainen]

It is true

>>"like-kind" attaches to the property itself, irrespective of purpose<<

It is true that like-kind describes the nature or character of the property, not its use. That's why investment real estate such as bare land is like kind to a rental house.

Most real estate is like kind to other real estate. The permanent conservation easement in the original post is like kind to the replacement farm land, even though the easement is not a fee interest and the exchangor retains the underlying title.

But usage is still an essential element for Section 1031 because the property must be held either for investment or productive use in a trade or business. Inventory is held for sale, not productive use. In your example, the contractor can use 1031 to dispose of the truck but the dealer can not use 1031 to acquire it. The tax treatment is determined separately for each taxpayer.

[Davc]

While so many are answering the question in the positive, is it safe to assume that "like-kind" attaches to the property itself, irrespective of purpose? I believe this is broadly interpreted for real estate, i.e. farmland for development land, business building for a rental building, etc.

I guess my question is does this same broad interpretation apply to things other than real property? For example, what about a Euclid truck used by its owner in construction but then traded to another owner who is an equipment dealer and uses it as inventory?

The use of the property given up by the acquiring party has no bearing on the exchange. However the rules are much tighter for property other than real estate. Examples:

A copyright for a song and one for a novel. Not like kind.

Cattle of different sexes. Not like kind.