IRS rules for 1031 like-kind exchanges and Form 8824

Section 1031 like-kind exchanges allow real estate investors to defer capital gains taxes by swapping investment or business property for replacement real property. Under current regulations, only real property qualifies for these exchanges; personal property such as equipment or vehicles is no longer eligible.

Investors must adhere to strict timelines to maintain tax deferral: replacement property must be identified within 45 calendar days of the sale and must be received within 180 days, or by the tax return due date, whichever is earlier. Form 8824 is used to report these exchanges, calculating deferred gains and the basis in the new property.

To qualify, properties must be held for investment or productive business use. Primary residences and property held primarily for sale are excluded. Additionally, real property located in the United States cannot be exchanged for property located outside the United States under like-kind rules.