The requirement for tax-deferred exchanges of property has always stated that the Replacement Property acquired must be of a “like-kind” to the property sold, known as the Relinquished Property. This principle has been in effect since the addition of IRC Section 1031 to the tax code in 1921. The basis for this requirement is the “continuity of investment” doctrine, which states that if a taxpayer continues their investment from one property to another similar property without receiving any cash profit from the sale, no tax should be triggered. However, it is important to note that this tax liability is only deferred, not eliminated. Given the significance of this requirement in tax-deferred exchanges, it is essential to understand what exactly “like-kind” means. Fortunately, in the context of real property, the analysis is straightforward. For 1031 exchange purposes, all real property is generally considered “like-kind” to each other, irrespective of the asset class or specific property type. Contrary to common misconceptions, a taxpayer selling an apartment building does not need to acquire another apartment building as a replacement property. Instead, they can choose any other type of real estate, such as raw land, an office building, an interest in a Delaware Statutory Trust (DST), etc., as long as it meets the criteria of being considered real property under applicable rules, intended for business or investment use, and properly identified within the 45-day identification period. It’s worth noting that personal property exchanges are no longer eligible for tax deferral under Section 1031 since the Tax Cuts and Jobs Act amendment in 2018. This leads us to the question: what qualifies as “real property” for Section 1031 purposes? Examples of real estate interests that are considered like-kind include single or multi-family rental properties, office buildings, apartment buildings, shopping centers, warehouses, industrial property, farm and ranch land, vacant land held for appreciation, cooperative apartments (Co-ops), Delaware Statutory Trusts (DSTs), hotels and motels, cell tower and billboard easements, conservation easements, lessee’s interest in a 30-year lease, warehouses, interests in a Contract for Deed, land trusts, growing crops, mineral, oil, and gas rights, water and timber rights, wind farms, and solar arrays. In December 2020, the IRS issued new regulations that provide further clarification on the definition of real property in the Code of Federal Regulations. These regulations specify certain types of “inherently permanent structures” and “structural components” that qualify as real estate and are eligible for exchange treatment. Examples of inherently permanent structures include in-ground swimming pools, roads, bridges, tunnels, paved parking areas, special foundations, stationary wharves and docks, fences, outdoor advertising displays, outdoor lighting facilities, railroad tracks and signals, telephone poles, power generation, and transmission facilities, permanently installed telecommunications cables, microwave transmission towers, oil and gas pipelines, offshore platforms, grain storage bins, and silos. Structural components likely to qualify as real property include walls, partitions, doors, wiring, plumbing systems, central air conditioning and heating systems, pipes and ducts, elevators and escalators, floors, ceilings, permanent coverings, insulation, chimneys, fire suppression systems, fire escapes, security systems, humidity control systems, and similar property. It’s important to note that foreign real estate is not considered like-kind to U.S. real estate, according to Section 1031(h) of the Tax Code. However, U.S. taxpayers can exchange foreign property for foreign property, which is considered like-kind and eligible for Section 1031 exchange treatment, with some limited exceptions. In addition to meeting the like-kind requirements, the potential replacement property must be formally identified within 45 days of selling the relinquished property, and the identified property must be acquired within 180 days of the sale. Property received by a taxpayer that was not identified or received within these timeframes is not considered like-kind. In the past, there was a misconception that the like-kind requirement meant trading into the same type of property that was sold. However, the true intention behind the like-kind requirement has always been to maintain the continuity of investment. While Section 1031 exchanges previously applied to personal property, intangible property, and real estate, the amendment in 2018 restricted exchanges to only real estate. Nevertheless, the determination of what constitutes like-kind real estate has remained unchanged—all types of real estate are considered like-kind to each other.