Like-Kind Property
Real property held for investment or business use that can be swapped for other such real property, tax-deferred.
Definition
A 1031 exchange lets you swap one investment or business real-estate asset for another "like-kind" one and defer the tax you would normally owe on the sale. For real estate, "like-kind" is broad: almost any real property held for investment or productive use in a trade or business qualifies to be exchanged for almost any other. Raw land can be exchanged for an apartment building, a rental condo for a triple-net-leased retail property, and so on. What matters is how the property is held (investment/business), not its type or quality. Since the 2017 tax law, only real property qualifies — not equipment, vehicles, or other personal property.
Why it matters
The like-kind test is the gate to the whole strategy. Property held mainly for personal use (your home) or as inventory (a house flipper’s stock) does not qualify. Getting the "held for" purpose right is the first thing a qualified intermediary and your CPA will check.
Related terms
General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.