Section 1031 of the Internal Revenue Code applies to real estate and personal property. One type of personal property that is commonly exchanged is aircraft. Our Mankato 1031 exchange specialists are available to walk you through the required steps for your aircraft exchange. Give us a call today to get your airplane exchange off the ground – 612.643.1031.
How to 1031 Exchange an Airplane
An aircraft exchange operates similarly to any other personal property exchange. You sell your old aircraft, identify replacement aircraft, and close on that new aircraft within 180 days. When done correctly, this process allows you to defer the capital gains tax on the sale of your aircraft and roll that into your new aircraft investment. 1031 exchanges can be utilized to exchange:
- Air frames
This whiteboard animation video offers a succinct explanation of the benefits of a 1031 aircraft exchange:
Time Periods, Like-Kind & Other Requirements
Just like exchanges of real estate and personal property, aircraft exchanges need to abide by certain rules. First, the aircraft you are exchanging needs to have been held for investment or business purposes. Airplane exchanges are also subject to the like-kind requirement. That means that your relinquished aircraft and your replacement aircraft both need to be like-kind to one another, or in the same general asset class. Aircraft exchanges also need to abide by the 45 day / 180 day rule. You have 180 days total to conduct your 1031 exchange. The first of those 45 days are used to identify in writing your replacement property. Lastly, you need to go up in debt, equity, and value. In other words, your new aircraft needs to be greater than or equal to your old relinquished aircraft in value, equity, and debt.
1031 Exchange of Aircraft in Mankato, MN
The importance of a qualified intermediary to the exchange process cannot be overstated. A QI handles exchanges every day and has the experience to make sure that your exchange goes off without a hitch. Drop us a line today to set up your 1031 aircraft exchange and realize the tax-saving benefits of a 1031 exchange – 612.643.1031.