Can You Exchange Domestic for Foreign Property Under Sec. 1031?

More often than you might expect, an investor is considering a #1031 exchange that involves property in and outside of the U.S. Unfortunately, current #IRS rules do not consider property within the US to be “like-kind” with property in a foreign country. Thus, a tax-deferred exchange is not possible.

There is, however, case law that clears the way for an exchange between property in the US and a US territory. The fourteen US territories include: American Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Island, Navassa Island, Northern Mariana Islands, Palmyra Atoll, Puerto Rico, Virgin Islands and Wake Island. So if you happen to want to do an exchange with property located in one of these territories, tax-deferral may be possible.

Section 1031 does allow for exchanges that are foreign-foreign, too. However, you should consult with a tax professional experienced with section 1031 if you are planning to conduct such a transaction.

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.