Excluded property refers to property not eligible for a 1031 exchange. The IRS excludes these properties and cannot be used in a 1031 exchange transaction.
Excluded property is not eligible for a 1031 exchange and includes stocks, bonds, personal property, vacation homes and second homes that are not used for rental income or business purposes. Investors must ensure that the property they are looking to exchange is eligible and that the exchange transaction is structured in compliance with IRS rules and regulations by consulting a tax professional or qualified intermediary. IRS does not allow mixing and matching eligible and ineligible properties in a single exchange transaction.
- Stock in trade or inventory
- Stocks, bonds, or other securities
- Certificates of trust or beneficial interests
- Partnership interests
- Notes or pieces of evidence of indebtedness
- Personal property such as cars, boats, or artwork
- Vacation homes or second homes that are not held for investment or business purposes
- It’s important for investors to remember that only property held for investment or business purposes is eligible for a 1031 exchange.
Investors should consult with a tax professional or qualified intermediary (QI) to ensure that the exchange property is eligible for a 1031 exchange and that the exchange transaction is in compliance with IRS rules and regulations.
Regarding excluded property, it’s also important to note that investors cannot mix and match eligible and ineligible properties in a single exchange transaction. Suppose an investor wants to exchange a property that is not eligible for a 1031 exchange. In that case, they must first sell it separately and then use the proceeds to purchase an eligible replacement property.
Excluded property refers to property that is not eligible for a 1031 exchange. It’s essential for investors to be aware of the types of property that are excluded and to consult with a tax professional or qualified intermediary to ensure that the exchange transaction is structured in compliance with IRS rules and regulations. Mixing and matching eligible and ineligible properties in a single exchange transaction is not allowed.