Quick Takeaways

  • The 1031 like-kind exchange is now over 100 years old, and has been helping Americans exchange property since 1921
  • Like-kind exchanges are far from being only for the wealthy; a look at recent exchanges show that only 5 percent of recently exchanged properties were held by corporations
  • “The great majority of properties now swapped under the like-kind exchange would not be sold if tax was due. Rather, their owners would continue to sit on the property, and the growth opportunity for putting the investment to better use would be wasted with the government collecting little in extra revenue”

Source: Like-Kind Exchange: Myth Busters (National Association of REALTORS®, May 6, 2021)

1031 Like-Kind Exchanges have been a part of real estate for more than one hundred years. A way to trade properties instead of going through the traditional buying and selling process, like-kind exchanges also often result in the ability to defer capital gains taxes. These transactions are complicated and have many special rules, which can impact taxes – sometimes significantly. You can view the various forms and instructions on the IRS website.

The IRS has many rules regulating like-kind exchanges, which affect taxes sometimes drastically. You can view the various forms and directions on the IRS website.

Like-kind exchanges can provide REALTORS® with the opportunity to work with two properties, and NAR finds 1031 like-kind exchanges to be an essential part of the real estate sector. They promote investment, job growth, and can greatly benefit underserved markets.

Delaware Statuary Trusts (DSTs) are a way to participate in 1031 exchanges without becoming the complete owner of a traded property. DSTs allow up to 100 investors to participate in the ownership of a property, such as a large medical building, and gain passive benefits. They can apply to any type of rental property – residential or commercial.

See References for more information.