Those who work in the investment real estate world are most likely already familiar with the 1031 exchange income tax strategy where you can sell real property that has been held for rental or investment and defer the payment of your capital gain taxes by acquiring replacement property. 

Personal Property 1031 Exchange

What you may not know is that the 1031 exchange strategy also applies to personal property.  Personal property that is rented or leased, held for investment or used in your trade or business qualifies for tax-deferred exchange treatment under Section 1031 of the Internal Revenue Code as a personal property 1031 exchange. 

1031 Exchange Process Is Virtually The Same

The processes and requirements for a personal property 1031 exchange are virtually the same with some limited exceptions.  The most notable exception is the definition of like-kind property when personal property is involved.  The like-kind standard is much more restrictive for personal property, so always consult with your 1031 exchange Qualified Intermediary before proceeding with a personal property 1031 exchange.

Unique Personal Property 1031 Exchanges

The ability to 1031 exchange personal property opens the door to some very interesting 1031 exchange transactions.  Those of you in agricultural or rural areas may have heard that livestock can be exchanged (as long as it is the same  sex), but those in more urban areas may not be very familiar with this. 

1031 Exchange Of Internet Domain Names

The one area that I have seen change and grow quite a bit over the last few years is the 1031 exchange of internet domain names that have been used in a trade or business or held for investment.  Some internet domain names can become quite valuable for any number of reasons, and the ability to defer the income taxes due on the sale of the internet domain name can be an incredible tool.  It allows the owner of the internet domain name to defer the payment of his or her income tax liabilities by acquiring other replacement internet domain names.  It allows the owner to improve his or her positions in terms of internet domain names without getting hit with taxes because all of their equity remains invested. 

It is important to note that internet domain names that have been acquired and held specifically for sale (i.e. inventory in your business) generally will not qualify for 1031 exchange treatment.  The mere generation of profit does not mean that it was held for investment.