Section 1031 Like Kind Exchanges

The properties being exchanged must be considered like kind in the eyes of the irs for capital gains taxes.

Section 1031 like kind exchanges. 1031 states the recognition rules for realized gains or losses that arise as a result of an exchange of like kind property held for productive use in trade or business or for investment. Generally if you make a like kind exchange you are not required to recognize a gain or loss under internal revenue code section 1031. Section 1031 like kind exchanges.

Section 1031 a of the internal revenue code 26 u s c. Taxpayers have been permitted under section 1031 to exchange property held for use in a trade or business or for investment for like kind property that will be similarly held without any need to recognize gain or loss on the exchange. A 1031 exchange helps defer capital gains taxes by selling your investment property and rolling your capital gains over to purchase a like kind property.

Prior to the tcja both real property and personal property were eligible for like kind exchange treatment. Section 1031 like kind exchanges have been a component of the internal revenue code almost from its inception. Section 1031 refers to an irs tax code that allows investors and businesses to reduce their tax liabilities when selling certain property.

Usually you have 180 days to purchase the new property. It states that none of the realized gain or loss will be recognized at the time of the exchange.