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The property must be a business or investment property, which means that it can't be personal property. Your home won't qualify for a 1031 exchange. However, a single-family rental property that you own could be exchanged for commercial rental property.
A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like-kind and equal or greater value.
Any type of investment property can be exchanged for another type of investment property. A single-family residence can be exchanged for a duplex, raw land for a shopping center, or an office for apartments. Any combination will work.
Properties are of like-kind if they're of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they're improved or unimproved. For example, an apartment building would generally be like-kind to another apartment building.
An IRC 1031 Tax-Deferred Exchange represents a legal, strategic method for acquiring or selling qualified properties in exchange for ?Like-Kind? properties within a specific time frame to defer capital gains taxes. You may be able to save substantial dollars by ?Exchanging? property.
1031 Exchange Rules in Montana The IRS allows Montana investors to sell rental properties, business properties, and land that was purchased for investment purposes and defer all capital gains taxes via IRC Section 1031.