Glossary

In a 1031 exchange, like-kind refers to the requirement that the property being sold (relinquished property) and the property being acquired (replacement property) must be of the same nature or character, even if they differ in grade or quality. For real estate, this generally means both properties must be held for investment or business purposes, not for personal use.

Key points about like-kind in a 1031 exchange:

• Broad interpretation: Most types of real estate qualify as like-kind, regardless of specific use. For example, you can exchange a rental property for a commercial building, vacant land for an apartment complex, or an office building for a retail center.
• Real property only: Since 2017, only real estate qualifies for 1031 exchanges (personal property like equipment or vehicles no longer qualifies).
• Held for investment or business: Both properties must be used for business or investment purposes. A primary residence or property held primarily for sale (e.g., a flip) typically doesn’t qualify.
• Location: The properties must be in the United States to be considered like-kind.

Always consult a tax professional or qualified intermediary to ensure compliance with IRS rules.