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Can I do a 1031 exchange
on a car?
Several
years ago, I inherited a rare,
antique automobile. I've held
onto it because I had read that
these cars were becoming more
and more valuable. Since that
time, the value of the car has
gone way up. Can I sell it and
defer the taxes in a 1031 exchange?
The
answer to this question is --
YES! This is a classic example
of a personal property exchange.
Although the vast majority of
1031 exchanges involve real estate,
you can do an exchange with any
number of other depreciable properties
-- airplanes, business equipment
and yes, even antique cars. And,
the rules are pretty much the
same -- the Old and New Properties
need to be held for business or
investment, 45 days to identify,
180 days to close, you still should
use a Qualified Intermediary,
etc. (See the 6 Rules for Exchanges).
The main difference between real
estate and personal property exchanges
is the "like-kind" requirement.
In real estate, pretty much all
real estate is like-kind to all
other real estate. So, you can
sell a rental and buy a commercial
property; sell a piece of land
and buy a vacation home; etc
[see:
1031 vacation home update: May
2007].
In personal property exchanges,
if you sell an antique car you
must buy another antique car
-- perhaps even the same make
and model. The same holds true
with airplanes, boats, equipment,
artwork, or whatever. So, these
types of exchanges are considerably
more restrictive.
So, before you bite-the-bullet
and pay capital gains taxes on
the sale of some asset, think
about performing a 1031 exchange
-- it could save you a bunch of
money.
--The
Experts
|
TEE-Shots
are Tips
from the Exchange
Experts
that are designed to make you
think about, and ask questions about, the 1031 exchange process. |
