1031 exchanges of aircraft and airplanes are a bit trickier than typical real estate exchanges. Call our Bemidji 1031 exchange professionals today if you have questions about exchanges of aircraft or other items of personal property – 877.373.1031.
Taking Flight with an Airplane Exchange
The 1031 exchange was created to allow taxpayers to defer their capital gains taxes and continue their investment when they sell real property. Most people automatically think of real estate when considering a 1031 exchange, but section 1031 of the Internal Revenue Code also applies to personal property items such as artwork, gold coins, and aircraft. The whiteboard video below explains the basics of an aircraft exchange:
Rules & Requirements of an Aircraft Exchange
Like every 1031 exchange, all property involved needs to be held for investment or business use. That means you can’t exchange a jet that you use primarily for personal use. You also need to go up in value, equity, and debt when moving your net proceeds into your new replacement property. And your exchange needs to be completed within the standard 45 day / 180 day time frames.
Another important rule in an airplane exchange is the like-kind requirement. What does like-kind mean? Well when you’re talking about real estate, the like-kind requirement is very broadly construed in that most real estate is like-kind to most other real estate. You can exchange a hotel in Bemidji for a piece of farmland outside of town. However, when it comes to personal property like aircraft, the definition of like-kind is much narrower. A qualified intermediary can help you determine what is and is not like-kind when it comes to your personal property exchange.
Aircraft Exchange Company in Bemidji, MN
Aircraft 1031 exchanges can be a little tricky in that the like-kind requirement is stricter than it is for real estate exchanges. For this and other reasons, it’s a good idea to involve a qualified intermediary early in the process. A QI can guide you through the steps of an exchange, prepare your documents for you, and answer all of your questions. Contact our Bemidji qualified intermediaries today – 877.373.1031.