The IRS code defines qualified property as “property held for productive use in a trade or business or for investment”. Thankfully for investors and certain businesses, there are some lesser-utilized property types that can also take advantage of the inherent benefits of a 1031 exchange
One of the four primary categories of qualified property eligible for 1031 treatment is depreciable, tangible, personal property (DTPP), such as: business, construction or farming equipment, These are qualified 1031 assets eligible for deferral of the tax that would result with depreciation recapture.
The key to utilizing a 1031 with a type of property that is other than real property is paying careful attention to defining what is “like-kind”. For example, in an equipment exchange, a pick-up truck is not considered “like-kind” with a dump truck. Unlike the broader nature of real property, to determine what is “like-kind” for the second primary category (DTPP), items must be in one of the same thirteen (13) general asset classes or under the same product code as outlined in the North American Industry Classification System (NAICS) manual.
Though it may be more restrictive in scope and challenging to determine what is “like-kind”, exchanging these types of assets is well worth the effort to avoid the higher recapture rate and keep all of the capital working for you.
We have assisted clients in completing 1031 exchanges on other type of equipment. These include:
- Concrete Mixers & Trucks
- Construction equipment
- Manufacturing equipment
- Boats and marine equipment
- Medical equipment
- Mining equipment
- Telecom/IT equipment (cell towers)
- Machinery
- Construction
- Concrete
- Timberland
- Farming
- Earth Moving/Road Grading
- Loading
- Gas and Oil Pipeline Equipment
- Printing Press
