To qualify for tax deferred exchange treatment under IRC §1031, the relinquished property must be exchanged for replacement
property that is of “like-kind”. For real property exchanges the term “like-kind” refers to the nature or character of the property
and not to its grade or quality. For example, it does not matter whether the real property involved is improved or unimproved
because that fact only relates to the grade or quality of the property and not to its kind or class. See Treas. Reg. §1.1031(a)-1(b).
In essence, all real property is “like-kind” with all other real property. Generally, however, for personal property exchanges the
relinquished and replacement property must both be in either the same General Asset Class or the same Product Class. To qualify
for an exchange the Exchanger must have held the relinquished property for investment, or for “productive use in their trade or
business,” and must intend to do the same with the replacement property. The following are examples of “like-kind” properties:
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Residential for commercial |
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Bare land for rental property |
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Fee simple interest for 30-year leasehold |
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Single family rental for multi-family rental |
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Non-income producing raw land for income producing rental property |
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Rental mountain cabin for a dental office in which the Exchanger intends to practice |
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Corporate twin-engine aircraft for a corporate jet |
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Mitigation credits for restoring wetlands for other mitigation credits |
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Buses for buses |
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Garbage routes for garbage routes |
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Livestock of the same sex (Note: livestock of different sexes are not of “like kind”) |
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