Atlanta Deferred Exchange
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Atlanta Deferred Exchange

Can I do a 1031 exchange of foreign property?

Q: I own a rental property in Quebec.  I would like to buy another rental property in London.  Can I do a 1031 exchange?

 

A:  Whether you can or should do a 1031 exchange depends on several questions.  First, will you have U.S. tax consequences from the sale of the Vancouver property that would merit doing a 1031 exchange to defer the taxes due?  If so, do both properties pass the “qualified use” test?  To be eligible for 1031 treatment, both properties must be held for investment or used in a trade or business.  Assuming you pass both these tests, then the benefits of a 1031 exchange are available to you.

 

 

There are two additional things to note.  If you wanted to sell your Canadian property and purchase a replacement in the US, you could not do a 1031 exchange.  Foreign and domestic properties are not considered like-kind.  Trade foreign for foreign, and domestic for domestic. Secondly, as in the US, foreign personal property can also be potentially exchanged with other foreign personal property, subjected to certain location and use restrictions.