About Like-Kind Property

"Like-kind" does not refer to the nature, character or type of property. Instead, it addresses the intended use of the property. Since many investors wrongly believe they must acquire property like their relinquished property, they miss out on opportunities and are quite surprised to learn a wide variety of properties can be considered "like-kind."

The main governing principle here is that provided the property is initially acquired and held for either business or investment purposes, it can qualify as a suitable replacement property under IRC Section 1031. Investors do not have to exchange for exactly the same type of property as relinquished.

These means that any of the following can be considered "like-kind" property exchanges: a duplex for a fourplex, bare land for improved property, a rental house for a retail center an apartment building for an office building.

There are however some items that do not qualify and these include: The tax code also lists items that are not considered "like-kind." These include:

1. stock in trade or other property held primarily for sale;
2. stocks, bonds, or notes;
3. other securities or evidences or indebtness;
4. interests in a partnership;
5. certificates of trusts or beneficial interest

Also any property outside the United States is considered non "like-kind" as well.

Next: About the Benefits of Exchanging

Back to 1031 Tax Exchange