1031 Exchange of Foreign Property

Can you acquire (sell) and/or purchase (buy) foreign real property and qualify for 1031 exchange treatment? This question is becoming more common as our world becomes a smaller place to live. We are becoming a more global economy each and every year, and income tax considerations become more complicated with the continued increase in cross border investment transactions.

The answer to the question is yes. You can 1031 exchange foreign real property (non-domestic) for foreign real property (non-domestic) and qualify for 1031 exchange treatment.

You can not 1031 exchange foreign real property (non-domestic) for United States real property (domestic) because domestic and foreign real property is not considered to be like-kind.

It will make sense to do so if the sale of your foreign real property or foreign asset will result in the recognition of a U.S. capital gain tax. You can defer the payment of the U.S. capital gain income tax consequence by completing a 1031 exchange transaction, but it must be an exchange of foreign real property for foreign real property.

Please feel free to contact me for more complete information regarding 1031 exchanges of foreign property.