Page 337 - Small Business IRS Training Guides

Identify Changes to IRC § 1031 and Effective Dates

IRC § 1031 provides an exception to the general rule requiring current recognition of gain or loss realized upon the sale or

exchange of property. IRC § 1031(a)(1) requires that the property exchanged and the property received be of a like-kind
and be property held for productive use in a trade or business or for investment. If, as part of the exchange, other (not

like-kind) property is received, realized gain must be recognized to the extent of the lesser of (i) the money and the
fair market value of the other property or (ii) the realized gain. IRC § 1031(b). Any realized loss is not recognized.

IRC § 1031(c).

Prior Law

Prior to the TCJA, IRC § 1031 applied to exchanges of personal and intangible property as well as real property with the

following exceptions:

• Stock in trade or other property held primarily for sale;

• Stocks, bonds, or notes;

• Other securities or evidences of indebtedness or interest;

• Interests in a partnership;

• Certificates of trust or beneficial interests; or

• Chosen in action.

Note: An interest in a partnership which has in effect a valid election under IRC § 761(a) to be excluded from the
application of all of subchapter K is treated as an interest in each of the assets of such partnership and not as an interest

in a partnership.

The term “stock” did not include certain mutual ditch, reservoir or irrigation stock. IRC § 1031(i).

73233-102 13303-3 Tax Cuts and Jobs Act