Can Everything Be Exchanged Under Section 1031?

Given that not only real estate, but many other types of property, can be exchanged using section 1031 of the IRS code, you might think that anything you own qualifies. Of course, that is not true.

Although section 1031 has been around since the 1920s, in 1986 the government revised the code to exclude certain types of property from exchange qualification. Before you embark on a 1031 exchange, be sure to understand whether your relinquished and replacement properties qualify.

Property that does not qualify for a 1031 exchange:

• A personal residence (although if you use a portion of your home for business or investment use, that portion may qualify)
• Stock/inventory used in trade
• Stocks
• Bonds
• Notes
• Securities/Indebtedness
• Partnership Interests
• Goodwill in a business
• Property held primarily for sale (e.g. flips, spec homes, developed lots)

Understanding before you begin what property will – and won’t – qualify for your proposed exchange, will save you headaches later on with the IRS.

If a 1031 exchange is in your future, visit ourwebsite to learn more about these powerful tax deferral tools andour qualified intermediary and replacement property locator services.