Personal Property Exchanges

1031 Exchanges are not limited to real property. Personal property can also be exchanged for other personal property of “like-kind” or “like-class”. Exchanges involving personal property give clients the ability to engage in the most diverse types of exchanges possible. Tangible depreciable personal property is considered “like class” if it falls within the same General Asset Class, or Product Class as described in Sectors 31 through 33 of the North American Industry Classification System (NAICS). For example, a backhoe is not like-kind to a bulldozer, but a backhoe and a bulldozer are like class because they are both identified with the same NAICS code for construction machinery and equipment. Exchanges involving tangible depreciable or non-depreciable personal property assets include:

  • Industrial Machinery
  • Aircraft
  • Passenger Vehicles
  • Trucks
  • Collectibles & Artwork
  • Construction Equipment
  • Agricultural Equipment
  • Racehorses and Livestock
  • Marine Vessels
  • Electric Generation Equipment

Below is an example of a Personal Property Exchange. The business entity is selling backhoes and front loaders and later purchasing bulldozers. As you can see the entity using a 1031 Exchange has a 35% tax savings, something most businesses would be interested in.

Additionally, as technology continues to develop and businesses continue to expand, so do the options with Personal Property Exchanges. Clients can also exchange “like-kind” intangible personal property assets, such as broadcast spectrums, franchise licenses, wireless telephone licenses, and copyrights of books, music and software.