It’s a common misconception that 1031 exchanges can only be used for real estate. The truth of the matter is that section 1031 can be used to exchange items of personal property as well as real estate. Drop us a line today to discuss your options for exchanging personal property in Mankato under section 1031 of the Internal Revenue Code – 612.643.1031.
1031 Personal Property Exchanges in Mankato, MN
1031 exchanges of personal property work in a very similar manner to real estate exchanges. You sell a piece of relinquished property and transfer your sales proceeds into a like-kind replacement property rather than paying out those capital gains taxes. The biggest difference is the type of property being exchanged. Here’s a quick list of personal property that can be exchanged in a 1031 transaction:
- Airplanes & Aircraft
- Numismatic Coins & Precious Metals
- Business Equipment
- Agricultural Equipment
- Fleets of Cars or Trucks Used in Your Business
Like real estate exchanges, personal property exchanges must be between property that has been held primarily for use in your trade or business. So you can’t 1031 exchange your personal car that you use to drive to work every day. But if you own a business that utilizes cars during the course of business, you could 1031 exchange those vehicles for newer, better vehicles in a 1031 transaction. You also need to make sure that you abide by the 1031 time frames, and that your new property is equal to or greater than your old property in value, debt, and equity.
Like-Kind Requirements in a Personal Property Exchange
In addition to the typical requirements of a 1031 exchange, the biggest thing you need to consider in a personal property exchange is the like-kind requirement. When it comes to personal property, the IRS is a lot more stringent as to what constitutes like-kind.
What are the Benefits of Exchanging Personal Property?
As long as you abide by the requirements for personal property exchanges, the benefits of a 1031 exchange are enormous. If you’ve ever sold a piece of personal property, you know that the capital gains taxes can hit you like a ton of bricks come tax time. A 1031 exchange allows you to defer those taxes and instead move them into a newer, better property so you can keep your investment compounding and building for you over time.
Start Your Mankato Personal Property Exchange
If you want to avoid a hefty tax bill when you sell an item of personal property that has been primarily held for investment or business purposes, a 1031 exchange may be a perfect fit. Make sure to involve a qualified intermediary early in the process to make sure all of your bases are covered. Whatever your situation, call our Mankato 1031 exchange professionals today to get started with your personal property exchange – 612.643.1031.