The 1031 Exchange is a powerful tool for investors, but there are some types of property that are not eligible for exchange. When considering a 1031 exchange, it’s important to understand excluded properties. The following post explains which assets do, and do not qualify.
Key Takeaways
- To qualify for a 1031 exchange, a property must be held for investment or used in a trade or business — personal-use property like a primary residence doesn’t qualify.
- Personal property such as cars, boats, furniture, and artwork is excluded from 1031 exchange treatment under current IRS rules.
- Financial assets, including stocks, bonds, other securities, and partnership interests, are not eligible for 1031 exchange treatment.
- Interests in S corporations and collectibles like coins or stamps are also excluded from 1031 exchange eligibility.
- A Qualified Intermediary can help confirm whether both the relinquished and replacement properties in a specific transaction qualify.
What Is a 1031 Exchange?
A 1031 Exchange is a transaction that allows an investor to defer paying capital gains taxes on the sale of an investment property by reinvesting the proceeds from the sale into a similar property.
To be eligible for a 1031 Exchange, the property must be held for investment or used in a trade or business. Property held primarily for personal use, such as a primary residence or vacation home, does not qualify.
Additional Assets That are Not Eligible For a 1031 Exchange
Under current IRS rules and regulations, the following types of property are also not eligible for a 1031 exchange:
– Personal property, such as cars, boats, furniture, or artwork
– Stocks, bonds, or other securities
– Partnership interests
– Interests in S corporations
– Collectibles, such as coins or stamps
If you are thinking about selling an investment property, it’s important to consult with a qualified intermediary to determine if a 1031 Exchange is right for you and if the property you currently own and the one you are thinking about purchasing qualifies for a 1031 Exchange.
We are here to guide you through this process and answer any questions that you may have. Contact us at 888-508-1901 to schedule a complimentary consultation. Our team is able to work with clients anywhere in the United States and we’d be happy to sort through your options that pertain to a 1031 Exchange.
Disclaimer: This content is for informational purposes only and does not constitute legal or tax advice. Consult your tax advisor or attorney for advice specific to your situation.
Chris Peterson — Texas Licensed Attorney & Founder, WealthBuilder 1031
Chris is the Owner and President of WealthBuilder 1031 and a licensed Texas attorney. He graduated from Wheaton College and the University of Texas School of Law and speaks regularly to realtors, accountants, and title companies about 1031 exchanges. Learn more →
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