What Cannot Be Exchanged?
Property that cannot be exchanged under Section 1031 include:
- Stock in trade (or other property held primarily for sale to customers).
- Common stocks, bonds or notes. The sale and purchase of common stock is not an exchangeable transaction.
- Other securities or evidences of indebtedness or interest.
- Interests in a partnership. Exchanging a limited partnership interest for a limited partnership interest, or a general partnership interest for a limited partnership interest, does not qualify as a nontaxable transaction.
- Certificates of trust or beneficial interests. (Land trusts are an example of property that cannot be exchanged because there is only a beneficial interest with this type of ownership.)
- REITS (real estate investment trusts): an interest in a REIT is an entity and not an interest in real property.
- Choses in action. A chose in action - like a lawsuit - is a right to recover or receive money or other consideration or property from another.
- After 1984, property received by the owner in a deferred exchange is not like-kind property if it is not identified within 45 day exchange period or if such property is received after the 180th day of the exchange period.
- After 1984, real property is not like-kind to business asset and other business-use personal property, and domestic property is not like-kind to foreign property.
- Foreign Currency is not like-kind to U.S. currency.
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