Like-Kind Exchange Overview
Since 1921, U.S. tax law has recognized that the exchange of one investment or business-use property for another of like-kind results in no change in the economic position of the taxpayer, and therefore, should not result in the immediate imposition of income tax. Real estate investors and commercial real estate practitioners place a very high priority on retaining the current like-kind exchange rules.
How a Section 1031 Like-Kind Exchange Works
The exchange rules permit the deferral of taxes, so long as the taxpayer satisfies numerous requirements and consummates both a sale and purchase within 180 days.
Like-Kind Exchange Member Stories
We need your help to educate lawmakers and their staff about 1031s. It is not a tax loophole for the wealthy; it is a tax tool that has brought immeasurable revenue, jobs, investment, and economic benefit to the U.S.
None at this time.
What is the fundamental issue behind Section 1031?
Since 1921, U.S. tax law has recognized that the exchange of one investment or business-use property for another of like-kind results in no change in the economic position of the taxpayer, and therefore, should not result in the immediate imposition of income tax. The like-kind exchange rules permit the deferral of taxes, so long as the taxpayer satisfies numerous requirements and consummates both a sale and purchase of replacement property within 180 days. Real estate investors and commercial real estate practitioners place a very high priority on retaining the current like-kind exchange rules.
I am a real estate professional. What does Like-Kind Exchange mean for my business?
The exchange rules often provide a real estate professional with an opportunity to facilitate two transactions: the sale of the relinquished property and the purchase of the replacement property. Any curtailment of the exchange rules will make both pieces of exchange transactions more difficult to conclude and would mean that many transactions would not take place. The like-kind exchange technique is among the most important of all tax provisions for real estate investors and commercial real estate professionals.
NAR Policy on Like-Kind Exchange
NAR opposes any change that would undermine the deferral mechanisms associated with exchanges or lead to fewer transactions.
The like-kind exchange technique is fundamental to the real estate investment sector. The current law provides investors with a great deal of flexibility in managing their real estate portfolio. Real estate is essentially an illiquid asset that requires substantial commitments of cash. Flexibility is needed in order to assure the free movement of property and capital. This, in turn, results in economic growth and job creation.
Legislative/Regulatory Status/Outlook on Section 1031
During the presidential campaign of 2020, then-candidate Joe Biden’s campaign listed the section 1031 like-kind exchange as an unwarranted loophole that largely benefits higher-income taxpayers and indicated that if elected, he would repeal it.
In early 2021, the Biden White House recommended to Congress that the tax deferral from like-kind exchanges be limited to $500,000 per taxpayer per year in order to help offset the cost of his infrastructure proposals. While this may seem like a large amount to many, such a limit would greatly diminish the use of section 1031 and seriously damage the real estate sector of the economy.
NAR is working with other interested stakeholders to oppose the repeal or limitation of the like-kind exchange provision and to educate Members of Congress and their staffs on the importance of this provision to the economy. For example, NAR is a leading member of a large coalition devoted to preserving the 1031 like-kind exchange. This group has funded two separated studies on the impact that repealing or limiting Section 1031 would have on the economy and on the real estate sector. Moreover, the coalition continues to have meetings with Members of Congress to explain the importance of tax-deferred exchanges in their states and districts. Also, NAR lobbyists continually stress the importance of keeping 1031 intact when meeting with Members and staff on other issues.
Federal Taxation Committee
Commercial Federal Policy Committee
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
1031 Exchanges: The Basics
Like-kind Exchanges are Now Clearer (Journal of Accountancy, Oct. 1, 2020) E
What is Like-Kind Real Estate? (The Balance, Sep. 17, 2020)
1031 Exchange Rules: What You Need to Know (Investopedia, Sep. 15, 2020)
What is a 1031 Exchange and What Do You Need to Know in 2019? (The Street, Mar. 14, 2019)
How to Do 1031 Exchanges to Defer Taxes (The Balance, Jan. 9, 2019)
Rules, Forms, & Guidelines From the IRS
About Form 8824, Like-Kind Exchanges (United States Internal Revenue Service, Sep. 19, 2020)
Like-Kind Exchanges – Real Estate Tax Tips (United States Internal Revenue Service, May 22, 2020)
What is IRS Form 8824: Like-Kind Exchange (TurboTax, 2020)
1031 Exchanges for REALTORS®
Like-Kind Exchange Transactions of REALTORS® in 2016-2019 (National Association of REALTORS®, Sep. 4, 2020)
1031 Like-Kind Exchanges, Insights and Updates (National Association of REALTORS®, Jun. 29, 2020)
NAR Letter to IRS (National Association of REALTORS®, Mar. 17, 2020)
This Twist on 1031 Exchanges Opens Opportunities (Chicago Agent Magazine, Aug. 2, 2019)
1031 Exchanges Save IRS & State Taxes, Even Leaving California (Forbes, Aug. 1, 2019)
The Real Estate Investor’s Guide to Reverse 1031 Exchanges (Bigger Pockets, June 3, 2019)
Like-Kind Exchanges Help Build Communities (Forbes, March 21, 2019)
Understanding the Differences Between Opportunity Zones and 1031 Like-Kind Exchanges (MCM CPA & Advisors, March 1, 2019)
Delaware Statutory Trusts (DSTs)
What is a Delaware Statutory Trust in a 1031 Like-Kind Exchange (The Motley Fool, Jun. 18, 2020)
Simplify Rental Property Ownership with Delaware Statutory Trusts (LSL CPAs and Advisors, June 17, 2019)
Delaware Statutory Trust (The Balance, Jan. 25, 2019)
Guide to 1031 Exchanges: Basics, Resources & Intermediaries (BiggerPockets.com)—Quick overview of how 1031 exchanges work, with links to recommended resources and a list of qualified intermediaries.
Federation of Exchange Accomodators (FEA)—Professional organization for exchange specialists. Includes directory of exchange companies & specialists around the U.S.
eBooks & Other Resources
Our eBooks collection contains a plethora of both audio and electronic books for learning a diversity of foreign languages and cultural etiquette standards. Below you will find a sampling of materials available; to identify additional materials visit our Library Catalog Advanced Search page and search for Subject: International or Subject: Foreign.
Books, Videos, Research Reports & More
The resources below are available for loan through Member Support. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Member Support at 800-874-6500 for assistance.
Building Wealth Through 1031 Exchanges, (Exchange Facilitator, LLC, 2006)
1031 Exchanges: How They Work, (Professional Exchange Accommodators, LLC, 2005)
The Tax-Free Exchange Loophole, (Wiley, 2005)
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The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.