What Are The 1031 Like Kind Exchange Requirements?

The section 1031 like kind exchange rules stipulate the requirements that must be met in order for an investor to defer payment of capital gains tax when selling an investment or business property.  A main 1031 exchange rule is that both the old (relinquished) and new (replacement) properties must be of a like kind.  1031 exchange properties of a like kind must fall into the category of either rental, investment, trade or business real estate, or vacant land.

Like kind exchange properties need to be of the same nature and character to qualify, regardless of differences in quality or grade.  According to the 1031 like kind exchange rules and requirements, properties must be held for a minimum of one year and one day.  Strict time limits are another major factor in like kind 1031 exchanges.  The exchange process must be completed within 180 days of the transfer of the relinquished property, with a replacement property having been identified within 45 days of the transfer.

The 1031 like kind exchange rules and regulations are complex.  In addition to a forward or deferred exchange, investors have the opportunity to look into a Tenant in Common exchange (TiC) or various types of 1031 reverse exchanges, depending on their circumstances.  For professional advice on deferring payment of tax on 1031 exchange properties, it is always advisable to consult a tax advisor or qualified intermediary who can advise on your particular circumstances.