Like Kind 1031 Exchange
A like kind exchange is a narrower type of a 1031 exchange where the properties must be “like-kind” or “like-class.” It applies to an extensive list of tangible and intangible personal property held in the production of income of a business such as heavy construction equipment, hospital, medical office, ranch, oil and gas, rental company, distributor and manufacturer. Eligible 1031 exchange property includes livestock, collectibles, gold, numismatic coins, artwork and musical instruments.
LKE Like Kind Exchange
The 1031 exchange rules governing personal property are more restrictive. Personal 1031 property replaced in a tax deferred exchange can be replaced repeatedly and recaptured depreciation deferred in an LKE or like kind exchange program. A LKE program is similar to a fixed asset application tracking assets and their depreciation schedules. Personal 1031 exchange property must be replaced with the same like kind or class property as defined in either one of thirteen General Asset Classes or North American Industry Classification System (NAICS) even if the like kind class have different class lives for depreciation purposes. For example, a car and a bus are not “like-kind” or “like-class” given their General Asset Classes are different.
Definition of Personal 1031 Property
Revenue Procedure 87-56, 1987-2 CB 674 defines thirteen General Asset Classes for like kind tangible 1031 exchange properties.
(I) Office furniture, fixtures, and equipment (asset class 00.11);
(II) Information systems (computers and peripheral equipment) (asset class 00.12);
(III) Data-handling equipment, except computers (asset class 00.13);
(V) Automobiles, taxis (asset class 00.22);
(VI) Buses (asset class 00.23);
(VII) Light general-purpose trucks (asset class 00241);
(VIII) Heavy general-purpose trucks (asset class 00242);
(IX) Railroad cars and locomotives, except those owned by railroad transportation companies (asset class 00.25);
(X) Tractor units for use over the road (asset class 00.26);
(XI) Trailers and trailer-mounted containers (asset class 00.27);
(XII) Vessels, barges, tugs, and similar water transportation equipment, except those used in marine construction (asset class 00.28); and
(XIII) Industrial steam and electric generation and/or distribution systems (asset class 00.4).
Additional Tangible and Intangible Personal Property
- Trades of major league sports contracts
- Noncurrency bullion type gold coins
- Patents and Copyrights
- Trademarks and trade names
- Designs and drawings
- Software
- Trade secrets and know-how.
To learn more, Contact Us at andgus@atlas1031.com and 800.227.1031.
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