What Counts as Like-Kind Property in a 1031

“Like-kind” misleads by sounding narrow — as if duplexes must find duplexes. For real estate the standard is nature-or-character, not grade or use: essentially all U.S. investment real property is like-kind to all other U.S. investment real property. The exchange guide states the rule; here’s its full breadth and its edges.

How broad it really is

All valid pairs: raw land into an apartment complex; a rental condo into a Wawa ground lease; farmland into an office building; a 30-year-plus leasehold into a fee interest; mineral rights, water rights, easements, and cell-tower ground interests into conventional buildings (state-law property characterization governs the exotics — confirm per asset). Improved-to-unimproved is fine. Residential-to-commercial is fine. The code cares that both sides are real property held for investment, not what color they are.

The edges worth respecting

Leaseholds: 30+ years remaining (options counted) reach like-kind status with fee interests; shorter ones don’t. Fractional interests: TIC shares qualify; partnership interests never do — the wrapper defeats the realty. REIT shares and funds: securities, excluded, whatever real estate lives inside. Fixtures and personal property: post-2018, nothing but real property qualifies, so allocate purchase prices accordingly where equipment rides along (car washes, restaurants). Foreign property: separate universe. Dealer inventory: property held for sale fails on intent regardless of its physical kind.

The strategy hiding in the breadth

Because the standard ignores management intensity, like-kind is the door from labor to passivity: the same rule that lets land become apartments lets apartments become corporate leases. Most of the exchange volume we see is exactly that walk — equity keeping its tax shelter while the owner’s workload goes to zero.