Fairhaven Realty
Fairhaven Realty, a br of Lakeway Realty, Inc.
Q & A 1031 Tax Exchanges
Posted on February 9, 2010
Bellingham, WA is enjoying another gorgeous day on this Tuesday, February 09, 2010. Does your grass need mowing? it's a great day for some outdoor exercise and getting your lawn mowed at the same time!
QUESTIONS AND ANSWERS ON 1031 TAX EXCHANGES (continued from previous blogs).
Are Section 1031 Exchanges limited only to real estate?
No. Any property that is held for productive use in a trade or business, or for investment, may qualify for tax-deferred treatment under Section 1031. In fact, many exchanges are “multi-asset” exchanges, involving both real property and personal property.
What is a “multi-asset” exchange?
A multi-asset exchange involves both real and personal property. For example, the sale of a hotel will typically include the underlying land and buildings, as well as the furnishings and equipment. If the taxpayer wants to exchange the hotel for a similar property, he would exchange the land and buildings as one part of the exchange. The furnishings and equipment would be separated into groups of like-kind or like-class property, with the groups of relinquished property being exchanged for groups of replacement property.
A multi-asset exchange involves both real and personal property. For example, the sale of a hotel will typically include the underlying land and buildings, as well as the furnishings and equipment. If the taxpayer wants to exchange the hotel for a similar property, he would exchange the land and buildings as one part of the exchange. The furnishings and equipment would be separated into groups of like-kind or like-class property, with the groups of relinquished property being exchanged for groups of replacement property.
Although the definition of like-kind is much narrower for personal property and business equipment, careful planning will allow the taxpayer to enjoy the benefits of an exchange for the entire relinquished property, not just for the real estate portion.
*Information gathered/quoted from the National Association of REALTORS® online library-1031 Exchange-FEA (Federation of Exchange Accommodations)
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