O.T.R.s ('other-than-real estate') that are 1031 exchangeable....

I know about Real Estate, but what ELSE can I 1031 Exchange....?

While we here at The Experts are doing our part to promote real estate back to its' former glory, there are other things you can do to save on capital gains taxes in the meantime.

Section 1031 of the Internal Revenue Code allows investors to sell and buy property, and defer paying the taxes on their gains. And yes, MOST 1031 exchanges are indeed for real estate, but not JUST traditional real estate as most people think of it. The term 'real estate' also includes things like oil and gas properties, mineral rights, mining rights, water rights, easements, grazing rights, air rights, and even some leases.

But you can also 1031 exchange personal property used in business, such as: horses, cattle, business equipment and machinery, aircraft, mobile homes, tractors and trailers, among other things. You can even exchange some of the assets of the business itself, including franchises, licenses, patents, etc. But remember: inventory and goodwill are not exchangeable.

When you do a like-kind exchange with real estate, almost any type of real estate may qualify. Here, the IRS's definition of 'like-kind' is very broad. You can, for example, sell a condo and buy a hotel. Or you can sell bare land and buy a skyscraper.

But with a personal property exchange, the definition of 'like-kind' is VERY NARROW. For example: if you are selling horses, you have to buy/exchange into ANOTHER horse of the same sex, etc. If you're selling a dental practice, you have to exchange into another dental, orthodontia, or similar practice.

And what about equipment and vehicles? They usually go down in value (unless it's a collector's item). So why would someone want to do a tax-deferred exchange if there's no gain? SIMPLE: all personal property is depreciable. If you don't do a 1031 exchange, you will have to recapture that depreciation and pay the tax at 25%! More on this in the NEXT Tee-Shot.

So while the short answer is, "Yes! You CAN exchange things other than real estate," remember that the details matter a lot! Make sure that your Qualified Intermediary is An Expert in these various types of exchanges.

Pick up the phone right now and call us to discuss your non-real estate 1031 exchange opportunities.

--The Experts