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Specialty 1031 Exchanges: Beyond Real Estate

The great majority of 1031 deals concern real estate and real estate alone. In these cases, the framework for the transaction is fairly straightforward: an exchanger engages a qualified intermediary, sells a property, and then uses the money to buy a new property within 180 days. In this way, taxes on any appreciation of the first property can be deferred. (Of course, picking the right qualified intermediary can still make a huge difference in security and ease of the transaction. And reverse 1031 exchanges, in which the exchanger purchases the new property before selling the old one, carry their own additional complexities.)

Real estate is an obvious choice for a 1031 exchange because, as long as both properties are in the United States, it’s relatively easy to establish that the assets in question are of “like kind” — the key legal requirement under the Internal Revenue Code. However, things get much trickier when structuring a 1031 exchange around other types of assets.

What kinds of properties qualify for a 1031 exchange?

From mineral rights, to aircraft, to intangibles such as patents, you’d be surprised at the breadth of property types that are eligible for a 1031 exchange. Here’s a partial list of the assets around which we’ve helped exchangers structure 1031 deals in the past:

Oil & gas and mineral interests

  • Leases
  • Working interests
  • Production payments
  • Oil & gas drilling and production equipment

Aircraft

  • Business aircraft
  • Exchanges for used or newly manufactured aircraft
  • Exchanges to construct improvements to aircraft
  • Dealer trade combined with a 1031 exchange to minimize state sales or use taxes

Art

  • Investment art
  • State sales and use tax requirements
  • Dealer trade combined with a 1031 exchange to minimize state sales or use taxes
  • Gallery and auction house practices and requirements
  • Like-kind and personal use versus investment use issues

Intangibles

  • Patents
  • Trademarks
  • Franchises
  • FCC licenses

Business-for-business exchanges

  • Multiple classes of personal property
  • Fixtures
  • Real estate
  • Intangibles

And keep in mind, this list is only a sample of what’s possible! With the right guidance, we believe the universe of 1031 like-kind exchange is broader than most investors realize.

What do you want to exchange?

At NES Financial, we’ve put together an industry-leading track record of 1031 success, over thousands of transactions and more than 25 years in the business. Our in-house counsel developed significant IRC 1031 guidance while at the IRS National Office. And we’ve built a cutting-edge administration platform, called eSTAC, from the ground up to maximize transaction security and transparency.

If you’re considering a property exchange, but not sure if you’ll qualify under Section 1031, give us a call and let us help you structure a smart solution.

Download 1031 Solution Kit