No, Like-Kind is actually very broad, any income, investment or business property may be exchange for any other income, investment or business property. Primary residences do not qualify however.
10 Misconceptions Surrounding the 1031 Exchange
The qualified Intermediary has to be someone that is totally independent. Anyone who has had a professional relationship with you during the previous two years may not be your Intermediary.
Wrong- you only have to be buying and selling income, investment or business properties. It doesn’t matter whom you buy from, only how you use the property.
Not True-It is actually very easy and the paperwork required is pretty straightforward. You just need a good intermediary to make sure the sets are handled in the right order and comply with IRS rules and regulations.
No, after the sale of the relinquished property, you have 45 days to identify the purchase property or properties and 180 days to close on it or them.
While you do need to file form 8824 with your tax return to report your 1031 exchange, you also have to submit all of the 1031 exchange documents that are prepared by the qualified intermediary.
Even though real estate exchanges are the most common type, a lot of exchanges are for personal property used in business.
When the client sells the relinquished property, the net proceeds go into an account controlled by the intermediary. These funds are then used to purchase the replacement property. Money or debt can be added if necessary, for a larger purchase. If you don’t use all of the money, whatever is remaining will be exposed to taxes.
Any level of investor can do an exchange as long as they’re selling or buying income, investment or business property.
There is no rule or regulation on how long you have to hold your exchange property. The only stipulation is that your intent was to hold the property for productive use in a trade or business for investment.