When exchanges were first introduced, they were actual exchanges between two parties who held very similar assets.
If you had a two story brick apartment building you had to exchange it for another two story brick apartment building. If your building was in San Diego, you could exchange for a building in another city, but it needed to be very similar in size and structure.
Over time, the definition has evolved, so that now “Like kind” simply means “similar in character or nature.” The property eligible for a 1031 exchange must belong to one of two property classes, and the exchange must stay within that class.
The two eligible classes are:
- Property used in the taxpayer’s trade or business.
- Property held for investment.
Today, you can exchange a San Diego single family rental for equity in a multi-story apartment building or even for a share in a TIC (Tenants in Common) property. Read more about Tenants in Common…
Want to know more?
Call 619-929-1413 and speak with one of our San Diego real estate investment specialists.
Note* The 1031 Exchange information on this site is meant as an overview and is not to be taken as tax advice. To determine how a 1031 Exchange would affect you, please consult your tax advisor and/or your tax attorney.