WHAT DOES LIKE-KIND MEAN?
IRC §1031(a)(1) allows for the exchange of property held for productive use in a trade or business or for investment for like-kind Replacement Property. A myriad of court cases and IRS rulings have established the definition of “like-kind” real estate to be very broad. Examples of like-kind property include single-family rentals, multi-unit housing, commercial or industrial properties, ranches, and bare land. Provided a property has not been personally used, such as a principal residence or second home, it should qualify for a §1031 Exchange.
Under IRS Code Section 1031, in an exchange of real property, any property which is considered real property under state law is “like-kind” with any other property which is deemed real property under that state law. Therefore, for example, you may trade unimproved property for a shopping center, or, farmland for an office building. However, the rules for exchanges of personal property are much more restrictive and require a detailed analysis of the assets being relinquished and acquired.
