Like-kind and related-party checker
Six questions about what you're selling, what you're buying and who's on the other side. You'll see which rules you clear, which you don't, and the exact rule behind each answer.
A general check against the rules cited below, not tax or legal advice. Your facts, and your CPA or tax attorney, decide whether an exchange qualifies.
The rules the checker applies
| Question | Rule | Source |
|---|---|---|
| Is it real property? | Only real property qualifies for exchanges after 2017. Land, buildings, inherently permanent structures, and their structural components are real property, and so are some intangibles like a leasehold of 30 years or more. Machinery, vehicles, art and crypto are not. | IRC 1031(a)(1); Reg. 1.1031(a)-3 |
| Is it like-kind? | Any US real property is like-kind to any other US real property. US and foreign real property are never like-kind to each other. | Reg. 1.1031(a)-1(b); IRC 1031(h) |
| Is it held the right way? | Both properties must be held for productive use in a trade or business or for investment. Property held primarily for sale, like a flip or developer inventory, is excluded, and so is your home. | IRC 1031(a)(1)-(2) |
| A second home? | The IRS won't challenge a dwelling unit as investment property if you owned it 24 months, rented it at a fair rent for at least 14 days in each of two 12-month periods, and limited personal use to 14 days or 10% of the rented days, whichever is more. | Rev. Proc. 2008-16 |
| A DST interest? | A beneficial interest in a DST that meets the ruling's limits is treated as a direct interest in the trust's real estate. | Rev. Rul. 2004-86 |
| Selling to a related person? | Allowed, but if either side disposes of its property within two years the gain is recognized then. Exceptions: death, involuntary conversion, or no tax-avoidance purpose. | IRC 1031(f) |
| Buying from a related person? | Generally fails when the related seller ends up with cash, even with a qualified intermediary in the middle. | Rev. Rul. 2002-83; IRC 1031(f)(4) |
This checks the categories, not your facts. Holding period, intent, who holds title, and how the exchange is papered can each change the answer. Treat a green result as a reason to keep going with your adviser, not as a conclusion.
Questions people ask
Is an apartment building like-kind to raw land?
Yes. Since the 2017 tax law, like-kind means real property for real property. Improved or unimproved, residential or commercial, a single-family rental or a share of a DST: all of it is like-kind to other real property in the United States, as long as both sides are held for investment or business use.
Can I sell my rental to my son and still do a 1031 exchange?
Yes, but both of you then have to hold your properties for two years. If either one sells within two years, the deferral unwinds, unless the sale is because of a death, an involuntary conversion, or a transaction the IRS accepts had no tax-avoidance purpose.
Can I buy my replacement from my brother?
Usually not. Revenue Ruling 2002-83 says an exchange fails when the taxpayer buys replacement property from a related person who ends up with the cash. It can work if your brother is doing his own 1031 exchange and doesn’t cash out, but that is a fact pattern to run past a tax adviser before you sign anything.
Does an LLC interest count as real estate?
No. A membership interest in an LLC taxed as a partnership is a partnership interest, and partnership interests are not real property for section 1031. A single-member LLC is disregarded, so its real estate is treated as yours.
Run your facts past a CPA
A CPA who does 1031 work can answer this in one call. If you're also buying with a loan, or have a question about the rules, ask Janover Capital, which runs this site.