Can I use a 1031 Exchange to Buy Foreign Property Outside of the United States?

Understanding 1031 Exchange Restrictions

A 1031 Exchange offers a way to invest in real estate while avoiding capital gains taxes. However, there are limitations on the types of property allowed in an exchange, especially when it comes to foreign property in 1031 Exchanges.

Can You Buy International Property with a 1031 Exchange?

A common question is whether you can buy international property through a 1031 Exchange. For example, someone might want to sell a Texas property and reinvest in a Mexico apartment complex. While this idea might make sense for your investment goals, you can’t legally use a 1031 Exchange for it.

1031 Exchange Property Requirements

To qualify for a 1031 Exchange, the replacement property must be within the United States if you are selling domestic property. You can purchase real estate in any state, but foreign properties do not qualify. For example, if you want to sell your Texas property and buy a ski lodge in Aspen, we can facilitate the exchange because both properties are US-based and not foreign property.

Investing in International Real Estate Outside a 1031 Exchange

If you plan to invest in international real estate, you must do so outside a 1031 Exchange. International investments come with unique considerations, and our attorneys can guide you through them. Of course, navigating the complexities of 1031 Exchange foreign property is best done with expert advice.

For instance, you may need to set up specific legal structures, like trusts, to protect your investment abroad. If you’d like help exploring your options, call us at (888) 508-1901. We’re here to support your goals before you sign any contracts.

For more 1031 exchange information, see these posts:

• 1031 Exchanges: Can You Exchange a U.S. Property for One Abroad?
• What Kind of Property Works for a 1031 Exchange?
• 4 Different Types of 1031 Exchanges
• What Property Qualifies for a 1031 Exchange? Airbnb, Ranches, Fourplexes & More