Need help on a 1031 question

3 Replies

I am looking at selling a business and the equipment with it. I was wondering if we can 1031 this to an apartment complex? The land from this business is not being sold. One tax man is telling me they are not like kind properties. Some more opinions would be great. Thanks this is in the state of Iowa if this matters.

1031 is part of the federal tax code, so it is the same state to state.  What you are asking is NOT like kind property.  The following is from the IRS website, pay special attention to the last sentence.

"Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land."

If the land and building would be packaged with it then this should count? Correct me if I am reading this wrong. Thanks in advance.

The land and building can be sold with the proceeds being used to acquire an apartment building.  Both are real estate and considered "like-kind".

Unless it is built into the building, the equipment will not qualify as a "like-kind" to real estate.

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