Fixed income in a 1031 exchange refers to investments in debt securities that provide a fixed stream of income, such as bonds or notes. These types of investments are not eligible for deferral under a 1031 exchange as they do not qualify as like-kind property.
Key-Takeaway
- Fixed income investments, such as bonds or notes, do not qualify for deferral under a 1031 exchange.
- Only real estate property that is considered like-kind property can be exchanged through a 1031 exchange.
Example
A taxpayer wants to sell their rental property and use a 1031 exchange to defer capital gains tax. However, instead of buying another rental property, they want to purchase a bond that provides a fixed income. In this case, the 1031 exchange cannot be completed as the bond is not considered like-kind property.
Tips
- Be sure to only invest in real estate property that qualifies as like-kind property for a 1031 exchange.
- Consider alternative investments for fixed income if a 1031 exchange is not an option.
Recommendations
- Consult with a tax professional and financial advisor to determine the best investment strategy, including alternative options for fixed income.
- Carefully consider the terms and conditions of any investment before proceeding, especially in the context of a 1031 exchange.