Personal Property Can Also be Part of a 1031 Exchange?
April 5, 2016
1031 exchanges may also include non-real estate assets (personal property) such as tangible hotel beds, business equipment, franchise licenses, or domain names. These are not individual belongings or personal use assets, they must have been held for productive use in a trade or business or for investment purposes. The other 1031 exchange requirements still apply.
Under IRC §179, personal property depreciates quickly for tax purposes over short periods of time (called "bonus depreciation"). The spread between its taxable basis (usually $0) and its FMV upon sale generates a taxable event that is taxed at depreciation recapture or ordinary income rates, which can be upwards of 35%. This situation occurs often with depreciable business use assets.