When an Exchanger is exchanging real property, like-kind is one of the real advantages of §1031 exchanges. All
real property is like-kind with all other real property. Like-kind refers to how the property is held by the investor, not the type or character of property. The Exchanger must have held the relinquished property for investment or for productive use in their trade or business and intend to do the same with the replacement property. The following are examples of like-kind properties:
- Residential for commercial.
- Bank building for swamp land.
- Bare land for residential rental.
- Fee simple interest for 30-year leasehold.
- Single family rental for multi-family rental.
- Non-income producing for income producing.
- Rental mountain cabin for a dental office in which the exchanger intends to practice.
If the Exchanger is exchanging personal property the rules are far more restrictive. Definitions of what is considered real property and personal property can vary from state to state. It is essential to consult with a tax advisor when structuring personal property exchanges because one transaction may have multiple exchanges, involving tax deferral on both the personal and real property. Personal property is considered like-kind only if it appears in the same General Asset Class or Product Class. Therefore the Exchanger may exchange:
