Can Co-Ops Be Exchanged Under Section 1031?

There have been a lot of changes to section 1031 over the past year or so. With these changes come a lot of questions. In this article, we will discuss whether co-ops can be exchanged under section 1031 of the Internal Revenue Code.

Tax Law Changes

With the implementation of the Tax Cuts & Jobs Act in 2018, there were a lot of changes to the 1031 exchange landscape. Most notably, 1031 exchanges were narrowed to only real estate – personal property exchanges were excluded from eligibility.

With these changes in mind, do co-ops qualify for 1031 exchange tax treatment?

Co-Ops & 1031 Exchanges

The short answer is yes – co-ops can qualify for 1031 exchange treatment. The IRS has issued a ruling that co-ops are eligible for 1031 exchange because they are to be treated as real estate. This means you can exchange co-op stock in a 1031 transaction, and interest in a co-op can be treated like interest in real property.

Get Help With Your 1031 Exchange

If you’re thinking about deferring taxes with a 1031 exchange, get professional assistance from a qualified intermediary to ensure the success of your exchange. The qualified intermediaries at CPEC1031 have two decades of experience helping clients throughout the country on their real estate exchanges. We work with you from the start of your exchange all the way through to closing. Give us a call today to talk about the details of your real estate exchange. You can find us at our primary office in downtown Minneapolis.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Like-Kind Exchanges of Cooperatives

In a 1031 exchange, you have to buy and receive like-kind property within the exchange period. There are all kinds of different property that can be exchanged. Real property is probably the easiest and most broadly construed like-kind requirement, in that a farm is like-kind with an industrial building. All kinds of real estate can easily and readily be exchanged.

1031 Exchange of Cooperatives

Some assets, such as cooperatives raise an interesting question. In a cooperative you get a share of stock and typically a long-term lease. So is an interest in a cooperative like-kind to the sale of raw land?

You may have to delve into the local state law where the cooperative exists to see if it's treated at the state level as a real property interest, or as a personal property interest. It may go down to how that cooperative was formed at the very beginning of its creation. If the cooperative elects to be treated as personal property and taxed by the local taxing authority as personal property that could impact later acquisitions of it by persons wanting to do 1031 exchanges.

Local Laws

So particularly with cooperatives you want to look at the local laws and how that cooperative was created to determine if it is considered an interest in real estate, which would be like-kind to other real estate, or if it is treated more correctly as personal property which would not be like-kind.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges of cooperatives, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved