1031 Tax Exchanges in Montana*
Like-Kind 1031 Property Exchanges in Montana for Tax Purposes
Whether it’s Montana real estate or not, generally, if you exchange business or investment property solely for another business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Service (IRS) Code Section 1031.
If, as part of the 1031 tax exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.
Note: Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.
Like-Kind Montana 1031 Tax Exchange Properties
Properties are of like-kind if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, farm and ranch livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.
Generally, Montana real properties, whether improved or unimproved, are of like-kind.
Real properties inside the United States and real properties outside the United States are NOT like-kind properties.
Benefits of Selling Real Property vs Exchanging Real Property (examples only)
Let’s assume you sold your property for $250,000 and you had a real estate loan of $100,000 on that property, and you purchased the property for $150,000 a few years ago:
| Sale Profit | $150,000 |
| Tax Payable | $28,000 |
| Available Investment Cash | $122,000 |
| New Investment Purchasing Power (25% down) | $488,000 |
Assume you choose to do a 1031 real estate exchange after selling your property:
| Sale Profit | $150,000 |
| Tax Payable | NONE |
| Available Investment Cash | $100,000 |
| New Investment Purchasing Power (25% down) | $600,000 |
More 1031 Exchange Resources
- IRS Publication 544: Sales and Other Dispositions of Assets
- Form 8824, Like-Kind Exchanges (PDF)
- Tax Tips – Real Estate
- Like-Kind Exchanges – Real Estate Tax Tips at the IRS website
- Bloomberg’s – 1031 Exchange Process Explained
*Accuracy of information on this page is not guaranteed and may have changed since written.
