To successfully complete a 1031 exchange, the property being sold must be replaced with like-kind property. For real estate held in a trade or for investment, the like-kind definition is very broad; with personal property held in a business, it is extremely narrow. As an example, any investment real estate is like-kind with other investment real estate.
Even a 30-year leasehold interest in land would be considered like-kind with a shopping center. When exchanging personal business property, though, the definition of “like-kind” narrows. Goodwill (the going concern value in the sale of a business) is not considered qualified property for exchange. In the vast majority of exchanges involving real estate, there is a reasonable amount of flexibility in choosing a “like kind” replacement property.
Be aware that real estate used either as a primary residence, personal use second home with not rental and property that is held primarily for sale, also referred to as inventory or flip property do not qualify for 1031 transactions- see Qualified Use .