I might be way off here but I just wanted to research this a little bit. I've done a strait 1031 for regular real estate in the past and it's worked out great. Can anyone provide advice on the following.
1) Property I'm selling is not real estate, it's an LLC that runs a software application/online service that leases residential apartments. The vast majority of the value in the business is the Intellectual Property and the actual website itself.
2) Would it ever be possible to say 1031 exchange this for some investment property? I know that software/website is not like real property, but what if I had a Qualified Intermediary receive the funds and then purchase the investment property through an LLC/Corp. Any chance that would be considered like-kind?
Is this too much of a stretch? I mean they would be be "like-kind" in that they are real estate businesses and generate revenue through leasing/renting real estate.
Sorry John. Not gonna work. In this scenario you're actually trying to exchange personal property for real property so even though they're both in the real estate biz they are not like kind. Personal property assets can be exchanged for other personal property assets but the rules of what constitutes like kind are much more stringent. Of course since you've done a regular 1031 you know that any kind of investment real estate is like kind for any other kind of investment real estate.
Sorry, this doesn't work. The assets held in the entity are not like kind to real estate. You must sell an interest in real estate in order to 1031 Exchange into an interest in real estate.
However, the business could sell its property (i.e., personal property, meaning non-real estate) and 1031 Exchange into other personal property, but the definition of like-kind in personal property exchanges is very specific. The business property must be broken down into component parts such as computers, desks, chairs, copiers, etc., and then exchanged for the same type of equipment (e.g, computers for computers, etc.)
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing