What are the criteria for an acceptable tax-deferred exchange?
Firstly, the property to be exchanged must be considered a Qualifying Property. In general, if regulations do not specifically exclude property from 1031 exchanges, they can qualify for tax deferment. There are however, certain specific exclusions including but not limited to: properties owned primarily for sale, bonds, notes and stock, inventories, stake in a partnership, and certificates of trusts or beneficial interest. The relinquished property and replacement property must also meet the standard of being used for Proper Purpose. Properties must be owned for productive use in business, trade, for investment. For example, an exchanger’s home does not qualify. The two properties to be exchanged must also be of Like-Kind. In the United States, all real property is considered to be of like-kind. Foreign property, however, is not considered like-kind to property located in the United States. Lastly, the transaction must be an exchange, meaning the relinquished property cannot be sold fo
