Section 1031 Like-Kind Exchanges and Entity Considerations

Robert S. Barnett, MST, JD, CPA

Like-kind exchanges have become increasingly common. Individuals and entities utilize IRC section 1031 like-kind exchanges to defer tax from the sale or transfer of real property. Individual shareholders and partners often desire different results; some seek to participate in the like-kind exchange, while others desire to “cash out” of the entity. In the context of such transactions, individuals and their related entities may engage in various transfers, including corporate or partnership liquidations, asset dropdowns, or contributions. This article examines these transactions in order to provide an understanding of some of the tax issues involved in structuring such like-kind exchanges.