By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
In the farming industry, a 1031 real estate exchange is a common strategy to allow a farmer “defer” paying the capital gains and/or ordinary income taxes on an investment property when it is sold, as long as the “like-kind property” is purchased with the profit gained by the sale of the first property.
Over the years, I have seen where folks have common misconceptions about this very complicated and technical section of tax law. Here is a list of various misconceptions I’ve found that folks have about 1031 Exchanges:
- “Like-kind” means I must exchange the same type of property, such as an apartment building, for another apartment building.
The term “like-kind” refers to the nature or character of the property not its grade or quality. For this reason nearly all real property is like-kind to each other.… Continue reading