No, 1031 exchanges can be
applied to personal property as well as real
estate. The tax code states that as long as
the property is being used in a trade or business
or held for investment, it may be exchanged
for property of like kind. “Like kind” has
a broad definition as applied to real estate,
but takes on a literal meaning when talking
about personal property. For example, replacing
a heavy-duty truck with a light-duty truck is
not considered a like-kind exchange. The IRS
has also disallowed the replacement of a lithograph
for a watercolor, because of different media.
Replacement property must be “like kind” and
in the same General Asset Class or Product Class,
as listed within Division D of the North American
Industry Classification System. If you are considering
an exchange of personal property, talk with your
accountant first to determine if the items fall
into the same asset class. |
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