A Like Kind Exchange, known as a 1031…many of you with real estate know the sweet benefits offered in the program but you may have likely also heard of the many “thou shall nots!”
One big one, of course, came with the Tax Cut and Jobs Act that limited all Like Kind Exchange activity to real property, not movable items or equipment. Like Kind Exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or for investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a Like Kind Exchange.
Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Improved real property is generally of like-kind to unimproved real property. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States is not of like-kind to real property outside the U.S.
So, when do you purchase the new property? How long must you own the one you plan to sell? What must you do with the sale proceeds in the middle of the multiple transactions? Can you restructure a partnership in the the process?
As you can read here from our friends at BDO, there are actually several attractive “flexibilities” available in a #Like Kind Exchange that might make your deal even sweeter. Give it a click. Also, another piece we have found interesting is this article by IPX 1031, listing ten major misconceptions about Like Kind Exchanges. As always, if our team at Wegmann Dazet can help, please shoot us an email and we will be right with you.
Latest posts by Melissa Chauvin, CPA
- Like Kind Exchange Options - January 21, 2020
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- Q & A with Tax Manager Melissa Chauvin on the Lifetime Exemption - August 28, 2019