Any tax deferred 1031 Exchange completed pursuant to Section 1031 needs to involve what is known as like kind properties. Watch this quick tutorial for the definition of Like Kind.
Any Tax Deferred Exchange completed pursuant to section 1031 needs to involve what are known as Like-Kind properties.
So what is the definition of Like-Kind? Well first it’s important to remember that Like-Kind refers more to the way a property is used rather than the way it looks.
For instance, the typical single-family detached home can be both the personal residence or an income property. Correct?
Okay, so then the definition for Like-Kind essentially boils down to you needing to use your property in one of two ways.
And those two methods which make up Like-Kind are property held for investment and property held for a productive use in a trade or business.
Basically property held for income.
So, as you’re out looking for candidate Replacement Properties, make sure your use of that new property will fit within one of those two categories. And that’s the definition of Like Kind.