1031 exchanges can be a beneficial tool for farmers to save money on taxes. But there have been some big changes over the past year in the realm of 1031 exchanges that farmers should be aware of as they enter 2021.
Changes in the Law
The Tax Cuts and Jobs Act, which went into effect in 2018, made some significant changes to section 1031 of the Internal Revenue Code. The Act preserved the 1031 exchange, but severely limited its scope. Now, only real estate qualifies for 1031 exchange treatment – personal property has been outright excluded. So what does that mean for farmers?
Well, it means that you can still benefit from doing a like-kind exchange of real estate (farmland and buildings), but you can no longer exchange items of personal property, such as:
- Farm Equipment
- Tractors & Other Vehicles
These exclusions don’t mean that you should toss the 1031 exchange out the window. Far from it! You can still benefit from using section 1031 to your advantage. You just need to be a bit more careful and precise moving forward.
Exchange Your Real Property
Defer your capital gains taxes on your next real estate sale by utilizing the 1031 exchange! The qualified intermediaries at Commercial Partners have over twenty years of experience working in the 1031 exchange industry. Don’t hesitate to reach out to our qualified intermediaries today. Our primary office is located in downtown Minneapolis but we work with clients throughout the United States. So no matter where your property is located – give us a call!