Like-Kind Requirement: Replacement property acquired in an exchange must be "like-kind" to the property being sold (relinquished property). Like-kind means "similar in nature or character, notwithstanding differences in grade or quality." In order for the properties to qualify as "like-kind," they must be held for productive use in a trade or business or held for investment purposes and be located within the United States. Foreign property does not qualify. For example: raw land held for investment may be exchanged for single family rentals or any combination of the below examples:
Section 1031 of the Internal Revenue Code, Sec. 1031 [1986 Code] 1031 - Exchange of property held for productive use or investment (a) Non-recognition of Gain or Loss from Exchanges Solely in Kind.
(1) IN GENERAL - No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.
(2) EXCEPTION - This subsection shall not apply to any exchange of — stock in trade or other property held primarily for sale.
(e) EXCHANGES OF LIVESTOCK OF DIFFERENT SEXES - for purposes of this section, livestock of different sexes are not property of a like-kind.