What are the requirements for a valid exchange?
• Qualifying Property – Certain types of property are specifically excluded from Section 1031 treatment: property held primarily for sale; inventories; stocks, bonds, or notes; other securities or evidences of indebtedness; interests in a partnership; certificates of trusts or beneficial interest. In general, if property is not specifically excluded, it can qualify for tax-deferred treatment. • Proper Purpose – Both the relinquished property and replacement property must be held for productive use in a trade or business or for investment. Property acquired for immediate resale will not qualify. The taxpayer’s personal residence will not qualify. • Like Kind – Replacement property acquired in an exchange must be “like-kind” to the property being relinquished. All qualifying real property located in the United States is like-kind. Personal property that is relinquished must be either like-kind or like-class to the personal property which is acquired. Property located outside the United S
