Didn't Get What You Wanted For Christmas? 1031 Exchange It!

O.K.  So you didn't receive exactly what you wanted for Christmas.  It happens to many of us each and every year, and we head right to the stores in order to return and/or exchange the gifts for something that we do want or need.  Do you realize that today, the day after Christmas, is historically the biggest shopping day of the year in terms of returning and exchanging gifts. 

Personal Property 1031 Exchanges

This shopping day, or more accurately, day of returns and exchanges, reminded me that many taxpayers do not realize that you can 1031 Exchange personal property.  The 1031 Exchange strategy is not just limited to real estate; that's right, it also applies to personal property that has been held and/or used as rental/leased property, investment property or used in a trade or business. 

Exchange Into a More Productive Property

The concept of a 1031 Exchange of personal property is similar in concept to the day after Christmas.  The personal property owned, rented or leased out or used by the taxpayer in his or her trade or business has become obsolete and/or less productive.  Some examples of personal property that might be a good candidate for a 1031 Tax Deferred Exchanges are:

• Aircraft or aviation equipment
• Shipping vessels
• Fleets of trucks or automobiles
• Machinery or equipment
• Franchises
• Livestock

The taxpayer wants to return or exchange the asset for a better, more efficient, and more productive asset without incurring any income tax consequences by structuring a 1031 Tax Deferred Exchange.

Like-Kind Replacement Property

1031 Exchanges of personal property can be more complicated than an exchange of real estate due to the fact that the definition of like-kind property is applied by asset class or line-item by line-item, if you will. 

You will be fine as long as you are working with a Qualified Intermediary that possesses the necessary experience and expertise in the areas of LKE Program Exchanges (i.e. personal property like kind exchanges).