1031 exchanges are typically of the "forward" variety - they start when you sell an asset and then buy a replacement asset of
like-kind. But more and more our clients are finding themselves in the position of needing to purchase a new asset
before they sell their old one.
Accruit is seeing more and more California construction companies utilizing 1031 exchanges to sell off old equipment. These outdated assets don't meet California's strict new emissions laws so companies are buying new, greener replacement equipment.
Everyone agrees that going green is good for the environment, but the cost of doing so can take a bite out of a company's bottom line. For example, if a demolition company sells just one fully depreciated loader for $60,000, they're going to owe the IRS approximately $21,000 in taxes.
If you've done a 1031 real estate like-kind exchange you know that the "like-kind" definition simply means investment real estate for investment real estate. For example, you can exchange a condo for a duplex, or a duplex for an apartment building, or a single family residence for bare land - you get the picture. But when it comes to "personal property" (the IRC term for tangible, non-real estate assets) the restrictions on what determines like-kind property narrow and can sometimes be a pain in the neck. For example, if you sell a light duty truck you can't replace it with a car, or can you?