The IRS provides an abundance of information on §1031, like-kind exchanges and other tax issues. For your convenience, we have incorporated some of the most relevant information that the IRS provides on their website.

In addition, we have included several IRS reference documents available for download from the Internal Revenue Website.

For more detailed information on your personal tax issues, please visit www.irs.gov or speak to your tax advisor.

IRS Like-Kind Exchanges Tax Tips
Generally, if you exchange business or investment property solely for business or investment property of a like kind, no gain or loss is recognized under Internal Revenue Code Section §1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.

Section §1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.

IRS Frequently Asked Tax Questions And Answers

Can you sell rental property and reinvest it into rental property without paying capital gains tax?
Unless you exchange properties in a qualifying like-kind exchange, you may not defer the gain on the sale of your rental property by purchasing replacement property. For additional information on like-kind exchanges, refer to Publication 544, Sales and Other Dispositions of Assets.

I have heard that I can sell my rental property and use the proceeds to purchase rental property of greater value and the transaction is viewed just like an exchange in that the tax is deferred until the new property is sold. Is this true?
What you have heard about is a like-kind exchange. Like-kind exchanges are subject to several rules and restrictions listed in Publication 544, Sales and Other Dispositions of Assets.

We sold a rental property last year and used the §1031 Tax Deferred Exchange law to defer the gains into another like-kind property. How do I handle this transaction on my tax return?
Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. The instructions for the form explain how to report the details of the exchange. Report the exchange even though no gain or loss is recognized.

If you have any taxable gain because you received money or unlike property, report it on Form 4797, Sales of Business Property, and Form 1040, SCHEDULE D, Capital Gains and Losses. Refer to Publication 544, Sales and Other Dispositions of Assets, which has a detailed section on like-kind exchanges.

What is a Like-Kind Property?

Internal Revenue Code,  Section 1031 outlines the essentials for deferring tax gain on property sale to a "like kind" property.

• Property held for productive use in a trade or business, such as income property, or
• Property held for investment