1031 Exchange-qualifing Property
I am interested in buying a small business.
I would like to exchange residential rental real estate for the business. I realize goodwill can not be included in an exchange, but I am confused if like-kind property "held for investment" (like rental r.e.) and business property can be used as replacement property. In other words, is this a mix and match proposition or strictly business personal property to business personal property and rental real estate to rental real estate.
I would appreciate any signals or sites which would help be clarify this. Thanks
You can only exchange real property for real property and personal property for personal property.
As long as the real property is held for investment, income production (rental) or for use in a business, it will qualify as like-kind real property. So, you can sell a SFR that has been held as rental property and acquire a commercial building for use in your business venture.
You can not sell the SFR and acquire personal property to be used in the business. If you were selling kitchen equipment, or office furniture, or other personal property and acquiring new replacement personal property you could structure that as a 1031 exchange.
Let me know if you have any more questions. I would be happy to provide you with a copy of the 1031 exchange code, regulations, and/or other guidelines for 1031 exchange transactions.
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