The Internal Revenue Service and the Treasury Department issued final regulations related to Section 1031 like-kind exchanges.
The new regs address the definition of real property, as well as the receipt of personal property that is incidental to real property received in a like-kind exchange.
“Real property” now includes land and, generally speaking, anything permanently built on or attached to land, and also includes anything that is characterized as real property by the applicable state and local laws.
Some intangible property, like leaseholds and easements, will also qualify as real property.
The Tax Cuts and Jobs Act of 2017 put significant limits on property exchanges under Section 1031. Among other things, personal or intangible property like vehicles, artwork, collectibles, patents and other intellectual property will not qualify for non-recognition of gain. In addition, to qualify for like-kind exchange treatment, the real property involved must be held for use in a trade or business, or for investment; property held mainly for sale does not qualify.