Does My Property Qualify for a 1031 Exchange?

So you are an #investor thinking about trading your current investment property for something else. Perhaps you’re relocating and want property closer to your new location. Or you’ve decided that you need a change in the type of investment you’re managing. Or myriad other reasons that investors look to trade up, into or out of an existing investment for something new.

Rather than selling outright, you’re convinced that the tax-deferred nature of a #1031 exchange is preferable for your immediate and longer-term goals. But how do you know whether your property qualifies? The #IRS makes it a little bit easier to determine that.

Any property held for productive use in a trade or business or for investment can be exchanged, under section 1031 of the Tax Code, for “like-kind” property.

Easy enough, right? The key is that the property you plan to relinquish must be similar in nature to the new property you plan to acquire. This means that the investor has the flexibility to change investment strategies to suit their ever-changing needs and desires.

Any type of investment property can usually be exchanged for another type of investment property. For example, a single-family rental home can be exchanged for a duplex, office, apartment building or even raw land where a future shopping center will be built.

The key is ensuring that the nature of the investment remains similar, rather than the form of the investment. So don’t limit your creativity when it comes to conducting a 1031 exchange.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.