Can I exchange rental property for REIT stock with 1031?

Some 1031 exchange investors have wondered whether they can sell their investment properties and complete a 1031 exchange into a Real Estate Investment Trust (REIT). The short answer is yes, but investors must follow some complex steps to successfully complete the exchange.

Can you 1031 into REIT stock?

An investor is not able to do a direct 1031 exchange into a REIT since REIT shares are not considered “like kind” property by the IRS for the purposes of a 1031 exchange.

Does a 1031 exchange apply to stocks?

Can You Do a 1031 Exchange on Stocks? In short, the answer to this question is no. 1031 exchanges are designated by the IRS as being specifically used for real estate investments. The law that governs 1031 exchanges was signed into effect in 1921 as part of The Revenue Act of 1921.

What can you invest in for a 1031 exchange?

A 1031 Exchange is about exchanging any real property for like-like real property. Commercial property including rental properties, condominiums, shopping centers, strip malls, timberland, gas and water interests, and land represent real property eligible for a 1031 exchange.

Can you 1031 into a syndication?

In a syndicated 1031 exchange, investors replace their investment real estate with syndicated real estate. A Delaware Statutory Trust (DST) is an entity that can syndicate real estate.

What is the difference between a REIT and a DST?

In a REIT you are issued dividends based on the shares that are owned. You as the investor are responsible for the taxes on these dividends. In a DST you receive passive monthly income at a yield of 4.5%-6.5%. The tax treatment on the DST is taxed at ordinary income.

What is not eligible for 1031 exchange?

Under IRC §1031, the following properties do not qualify for tax-deferred exchange treatment: Stock in trade or other property held primarily for sale (i.e. property held by a developer, “flipper” or other dealer) Securities or other evidences of indebtedness or interest. Stocks, bonds, or notes.

Which of the following would not qualify as a 1031 exchange?

Each owner is considered to have an individual, undivided interest in a property. Therefore, owners can buy, sell, or place their property in a 1031 exchange without regard to the actions of the others. The other answer choices — bonds, stocks, and business partnerships — are not allowed under Section 1031 regulations.