26 USC 1031 - Exchange of real property held for productive use or investment

U.S Code last checked for updates: Nov 23, 2024

§ 1031.

Exchange of real property held for productive use or investment

(a)

Nonrecognition of gain or loss from exchanges solely in kind

(1)

In general

(2)

Exception for real property held for sale

(3)

Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property

For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if—

(A)

such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or

(B)

such property is received after the earlier of—

(i)

the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or

(ii)

the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs.

(b)

Gain from exchanges not solely in kind

(c)

Loss from exchanges not solely in kind

(d)

Basis

(e)

Application to certain partnerships

(f)

Special rules for exchanges between related persons

(1)

In general

If—

(A)

a taxpayer exchanges property with a related person,

(B)

there is nonrecognition of gain or loss to the taxpayer under this section with respect to the exchange of such property (determined without regard to this subsection), and

(C)

before the date 2 years after the date of the last transfer which was part of such exchange—

(i)

the related person disposes of such property, or

(ii)

the taxpayer disposes of the property received in the exchange from the related person which was of like kind to the property transferred by the taxpayer,

there shall be no nonrecognition of gain or loss under this section to the taxpayer with respect to such exchange; except that any gain or loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which the disposition referred to in subparagraph (C) occurs.

(2)

Certain dispositions not taken into account

For purposes of paragraph (1)(C), there shall not be taken into account any disposition—

(A)

after the earlier of the death of the taxpayer or the death of the related person,

(B)

in a compulsory or involuntary conversion (within the meaning of section 1033) if the exchange occurred before the threat or imminence of such conversion, or

(C)

with respect to which it is established to the satisfaction of the Secretary that neither the exchange nor such disposition had as one of its principal purposes the avoidance of Federal income tax.

(3)

Related person

(4)

Treatment of certain transactions

(g)

Special rule where substantial diminution of risk

(1)

In general

(2)

Property to which subsection applies

This paragraph shall apply to any property for any period during which the holder’s risk of loss with respect to the property is substantially diminished by—

(A)

the holding of a put with respect to such property,

(B)

the holding by another person of a right to acquire such property, or

(C)

a short sale or any other transaction.

(h)

Special rules for foreign real property

(Aug. 16, 1954, ch. 736, 68A Stat. 302; Pub. L. 85–866, title I, § 44, Sept. 2, 1958, 72 Stat. 1641; Pub. L. 86–346, title II, § 201(c)–(e), Sept. 22, 1959, 73 Stat. 624; Pub. L. 91–172, title II, § 212(c)(1), Dec. 30, 1969, 83 Stat. 571; Pub. L. 98–369, div. A, title I, § 77(a), July 18, 1984, 98 Stat. 595; Pub. L. 99–514, title XVIII, § 1805(d), Oct. 22, 1986, 100 Stat. 2810; Pub. L. 101–239, title VII, § 7601(a), Dec. 19, 1989, 103 Stat. 2370; Pub. L. 101–508, title XI, §§ 11701(h), 11703(d)(1), Nov. 5, 1990, 104 Stat. 1388–508, 1388–517; Pub. L. 105–34, title X, § 1052(a), Aug. 5, 1997, 111 Stat. 940; Pub. L. 106–36, title III, § 3001(c)(2), June 25, 1999, 113 Stat. 183; Pub. L. 109–135, title IV, § 412(pp), Dec. 21, 2005, 119 Stat. 2640; Pub. L. 110–234, title XV, § 15342(a), May 22, 2008, 122 Stat. 1518; Pub. L. 110–246, § 4(a), title XV, § 15342(a), June 18, 2008, 122 Stat. 1664, 2280; Pub. L. 115–97, title I, § 13303(a)–(b)(5), Dec. 22, 2017, 131 Stat. 2123, 2124.)

cite as: 26 USC 1031