What Is "Like-Kind" Property in a 1031 Exchange?

Like-kind property is a requirement for a 1031 exchange. In order to be allowed to defer taxes paid on income earned from the sale of current property, the new property must be "like-kind" to the current property. This means that the new property must be generally of the same character or type as the old property. The owner can exchange equipment for equipment, for example, but not equipment for real estate.

However, real estate (land) can be exchanged for other real estate. It does not matter what type of real estate it is, and the owner can exchange empty land for an apartment building. You cannot exchange personal property, such as a home.

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If the property is not "like-kind," you will probably have to pay the full capital gains taxes on it and will therefore not get the benefit of the 1031 exchange.