Economists' Outlook

Housing stats and analysis from NAR's research experts.

Sixty-Three Percent of REALTORS® Participated in Like-Kind Exchanges

This blog post was written by George Ratiu, Director of Quantitative & Commercial Research and Erin Fitzpatrick, Research Intern

Real estate constitutes the foundation of economic activity, with real estate transactions providing the connecting pathways between individuals, businesses, and governments. In 2014 the value of real estate in the United States totaled $42.4 trillion[1]. Sales of commercial real estate assets—priced at or above $2.5 million—totaled $438 billion[2] in 2014, while sales of smaller commercial assets—priced below $2.5 million—comprised an additional $60 billion[3]. In addition, sales of residential real estate totaled $1.1 trillion[4] in 2014, with existing properties accounting for 89 percent of total.

For a significant proportion of real estate market participants, like-kind exchanges (LKE) provide an important vehicle to sell and acquire property. The Internal Revenue Code (IRC) Section 1031 codifies that the tax owed on any gain after a sale may be deferred as long as the proceeds are reinvested in a similar property through a like-kind exchange.  The Internal Revenue Service (IRS) makes note of the fact that while the gain “is tax-deferred […] it is not tax-free.”[5]

Like-kind exchanges (LKE) feature prominently in NAR members’ real estate transactions. Based on the Like-Kind Exchanges: Real Estate Market Perspectives 2015 report, slightly over 60 percent of respondents indicated that they participated in at least one like-kind exchange within the 2011-2014 period. Of the total, 40 percent participated in 1—3 transactions, while 14 percent were active in 4—6 exchanges.

LKE trans
REALTORS® were active participants in like-kind exchanges during 2011-2014. The majority of respondents—68 percent—indicated that they acted as a real estate broker/agent in the exchange. An additional 24 percent identified their role as a real estate owner/investor. NAR members acted as professional advisors or qualified intermediaries in six percent and two percent of transactions respectively.
mem role in like
REALTORS® were asked about the composition of business entities which held the properties transferred through a like-kind exchange. The survey results show that 48 percent of total FMV of the exchanged properties was held in an individual or sole proprietorship and 33 percent was held in a S-Corporation, Partnership, LLC, LLP, or MLP. An additional 10 percent of properties were held in C-Corporations (which excluded REITs).
mark val
To access the Like-Kind Exchanges: Real Estate Market Perspectives 2015 report, visit

[1] Federal Reserve Board, Flow of Funds B.101, B103, B104 tables

[2] Real Capital Analytics, US Capital Trends®

[3] Smith and Ratiu (2015), "Small Commercial Real Estate Market," National Association of REALTORS®

[4] U.S. Census Bureau, New Residential Sales; National Association of REALTORS® Existing Home Sales

[5] Internal Revenue Service, Like-Kind Exchanges Under IRC Code Section 1031, FS-2008-18, February 2008

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