The IRS does not consider REIT shares to be “like kind” property for the purposes of a 1031 exchange, so an investor cannot directly exchange REIT shares into a REIT.
Do Reits Qualify For 1031 Exchanges?
The diversification offered by REITs has attracted many investors, so many wonder if such an attractive investment qualifies for a 1031 exchange. A 1031 exchange cannot be conducted with REITs as a replacement property.
What Types Of Investments Qualify For A 1031 Exchange?
A 1031 exchange can be used to purchase commercial properties such as rental properties, condominiums, shopping centers, strip malls, timberland, gas and water interests, and land. Delaware Statutory Trusts and DST properties are examples of 1031 Exchange replacement properties.
What Is Not Eligible For 1031?
A 1031 exchange does not have any of these characteristics. Exchanges are allowed for properties that are used for productive purposes in a trade or business. Stocks, bonds, notes, securities, and interests in partnerships are all excluded from these properties. In addition, property that is primarily for sale is excluded.
Is A Reit A Like Kind Exchange?
Due to REIT investments being securities, they do not meet the requirements for a typical 1031 exchange as a replacement property. It is a tangible asset to own real estate.
Which Type Of Property Does Not Qualify For 1031 Exchange?
Stock in trade or other property that is primarily for sale is not eligible for tax-deferred exchange treatment under IRC *1031. A developer’s property, a flipper’s property, or a note or note of interest. Stocks, bonds, or notes are examples of securities.
Do Stocks Qualify For 1031 Exchange?
According to this law, only investments that meet the definition of “real property” as defined by the IRS are eligible to be used in a 1031 exchange. The IRS considers stocks, bonds, and other types of assets to be non-real property.
What Assets Qualify For Like-kind Exchange?
A like-kind exchange is generally a transaction in which a real estate property is used for productive purposes in a trade or business. If a taxpayer sells an investment property and buys another within a stipulated time period, he or she will not have to pay tax on the first sale.
What Are 1031 Exchange Assets?
The 1031 exchange is a tax-deferred exchange for property that is used for productive purposes in a business or trade. The result is that any real property that is held for investment purposes can qualify for 1031 tax treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family home.
Which Properties Do Not Qualify For A Like-kind Exchange?
A like-kind property cannot be defined as anything other than securities, stocks, bonds, partnership interests, or other financial assets.
When Can You Not Do A 1031 Exchange?
In most cases, we encounter situations where we cannot exchange a residence for a new one, such as the sale of a primary residence or flipping. The relinquished property must be held for productive purposes in a trade or business or for investment in order to qualify for a 1031 exchange.
What Is Considered A Like Kind Exchange?
Exchanges like this are like-kind. As a result of a like-kind exchange, an asset can be disposed of and another asset acquired without generating a capital gains tax liability from the sale of the first asset, thereby reducing the tax burden on the seller.
What Property Qualifies For A Like Kind Exchange?
Property of the same type, character, or class is considered like-kind. There is no difference between quality and grade. There will be similarities and differences between most real estate and other real estate. In the same way that vacant land can be improved by improving real property with a residential rental house, so can real estate.