1031 exchanges are an effective method for deferring your taxes when selling real estate. However, not all property qualifies for 1031 exchange treatment. It’s important to understand what property qualifies before diving into an exchange. In this article, we are going to talk about the types of property that are disqualified from 1031 exchange treatment.
Property Held for the Wrong Use
The most fundamental rule that governs 1031 exchanges is the qualifying purpose rule, which states that all property involved in a 1031 exchange transaction needs to be held for a qualifying purpose. Essentially, any property used in a 1031 exchange has to be held for investment purposes or for use in your trade or business. That means property held for personal use (such as your family home) is disqualified.
Personal Property
Items of personal property are also excluded from 1031 exchange treatment. This is a relatively new change that came about with the passage of the Tax Cuts & Jobs Act, which excluded personal property exchanges. Taxpayers are no longer allowed to exchange aircraft, business equipment, artwork, gold coins, or other items of personal property. Only real estate is eligible for 1031 exchange treatment (at the time of this writing).
1031 Exchange Services in MN
At CPEC1031, we approach each and every 1031 exchange transaction with the unique attention that it needs. Our qualified intermediaries have over twenty years of experience facilitating exchanges of real estate in Minnesota and across the country. If you are exchanging property under section 1031, we can help you with every aspect of your exchange – from preparing documents to answering your questions, and more! Contact us today to learn more about the 1031 exchange services we provide and get your exchange off the ground.
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.
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