US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 1031

Exchange of real property held for productive use or investment

(a)

Nonrecognition of gain or loss from exchanges solely in kind

(1)

In general

No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

(2)

Exception for real property held for sale

This subsection shall not apply to any exchange of real property held primarily for sale.

(3)

Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property

For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if—
(A)
such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(B)
such property is received after the earlier of—
(i)
the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
(ii)
the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs.
(b)

Gain from exchanges not solely in kind

If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property.

(c)

Loss from exchanges not solely in kind

If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.

(d)

Basis

If property was acquired on an exchange described in this section, section 1035(a), section 1036(a), or section 1037(a), then the basis shall be the same as that of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange. If the property so acquired consisted in part of the type of property permitted by this section, section 1035(a), section 1036(a), or section 1037(a), to be received without the recognition of gain or loss, and in part of other property, the basis provided in this subsection shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such other property an amount equivalent to its fair market value at the date of the exchange. For purposes of this section, section 1035(a), and section 1036(a), where as part of the consideration to the taxpayer another party to the exchange assumed (as determined under section 357(d)) a liability of the taxpayer, such assumption shall be considered as money received by the taxpayer on the exchange.

(e)

Application to certain partnerships

For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.

(f)

Special rules for exchanges between related persons

(1)

In general

If—
(A)
a taxpayer exchanges property with a related person,
(B)
there is nonrecognition of gain or loss to the taxpayer under this section with respect to the exchange of such property (determined without regard to this subsection), and
(C)
before the date 2 years after the date of the last transfer which was part of such exchange—
(i)
the related person disposes of such property, or
(ii)
the taxpayer disposes of the property received in the exchange from the related person which was of like kind to the property transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to the taxpayer with respect to such exchange; except that any gain or loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which the disposition referred to in subparagraph (C) occurs.
(2)

Certain dispositions not taken into account

For purposes of paragraph (1)(C), there shall not be taken into account any disposition—
(A)
after the earlier of the death of the taxpayer or the death of the related person,
(B)
in a compulsory or involuntary conversion (within the meaning of section 1033) if the exchange occurred before the threat or imminence of such conversion, or
(C)
with respect to which it is established to the satisfaction of the Secretary that neither the exchange nor such disposition had as one of its principal purposes the avoidance of Federal income tax.
(3)

Related person

For purposes of this subsection, the term “related person” means any person bearing a relationship to the taxpayer described in section 267(b) or 707(b)(1).

(4)

Treatment of certain transactions

This section shall not apply to any exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection.

(g)

Special rule where substantial diminution of risk

(1)

In general

If paragraph (2) applies to any property for any period, the running of the period set forth in subsection (f)(1)(C) with respect to such property shall be suspended during such period.

(2)

Property to which subsection applies

This paragraph shall apply to any property for any period during which the holder’s risk of loss with respect to the property is substantially diminished by—
(A)
the holding of a put with respect to such property,
(B)
the holding by another person of a right to acquire such property, or
(C)
a short sale or any other transaction.
(h)

Special rules for foreign real property

Real property located in the United States and real property located outside the United States are not property of a like kind.

Aug. 16, 1954, ch. 73668A Stat. 302Pub. L. 85–866, title I, § 4472 Stat. 1641Pub. L. 86–346, title II, § 201(c)73 Stat. 624Pub. L. 91–172, title II, § 212(c)(1)83 Stat. 571Pub. L. 98–369, div. A, title I, § 77(a)98 Stat. 595Pub. L. 99–514, title XVIII, § 1805(d)100 Stat. 2810Pub. L. 101–239, title VII, § 7601(a)103 Stat. 2370Pub. L. 101–508, title XI104 Stat. 1388–508Pub. L. 105–34, title X, § 1052(a)111 Stat. 940Pub. L. 106–36, title III, § 3001(c)(2)113 Stat. 183Pub. L. 109–135, title IV, § 412(pp)119 Stat. 2640Pub. L. 110–234, title XV, § 15342(a)122 Stat. 1518Pub. L. 110–246, § 4(a)122 Stat. 1664Pub. L. 115–97, title I, § 13303(a)131 Stat. 2123(, ; , , ; –(e), , ; , , ; , , ; , , ; , , ; , §§ 11701(h), 11703(d)(1), , , 1388–517; , , ; , , ; , , ; , , ; , title XV, § 15342(a), , , 2280; –(b)(5), , , 2124.)

Editorial Notes

Codification

Pub. L. 110–234Pub. L. 110–246Pub. L. 110–234section 4(a) of Pub. L. 110–246 and made identical amendments to this section. The amendments by were repealed by .

Amendments

Pub. L. 115–97, § 13303(b)(5)2017—, substituted “real property” for “property” in section catchline.

Pub. L. 115–97, § 13303(a)Subsec. (a)(1). , substituted “real property” for “property” wherever appearing.

Pub. L. 115–97, § 13303(b)(1)(A)Subsec. (a)(2). , amended par. (2) generally. Prior to amendment, text read as follows: “This subsection shall not apply to any exchange of—

“(A) stock in trade or other property held primarily for sale,

“(B) stocks, bonds, or notes,

“(C) other securities or evidences of indebtedness or interest,

“(D) interests in a partnership,

“(E) certificates of trust or beneficial interests, or

“(F) choses in action.

For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.”

Pub. L. 115–97, § 13303(b)(2)Subsec. (e). , (3), added subsec. (e) and struck out former subsec. (e). Prior to amendment, text read as follows: “For purposes of this section, livestock of different sexes are not property of a like kind.”

Pub. L. 115–97, § 13303(b)(4)Subsec. (h). , amended subsec. (h) generally. Prior to amendment, subsec. (h) related to special rules for foreign real and personal property.

Pub. L. 115–97, § 13303(b)(1)(B)Subsec. (i). , struck out subsec. (i). Text read as follows: “For purposes of subsection (a)(2)(B), the term ‘stocks’ shall not include shares in a mutual ditch, reservoir, or irrigation company if at the time of the exchange—

“(1) the mutual ditch, reservoir, or irrigation company is an organization described in section 501(c)(12)(A) (determined without regard to the percentage of its income that is collected from its members for the purpose of meeting losses and expenses), and

“(2) the shares in such company have been recognized by the highest court of the State in which such company was organized or by applicable State statute as constituting or representing real property or an interest in real property.”

Pub. L. 110–2462008—Subsec. (i). added subsec. (i).

Pub. L. 109–1352005—Subsec. (h)(2)(B). substituted “subparagraphs” for “subparagraph” in introductory provisions.

Pub. L. 106–361999—Subsec. (d). , in last sentence, substituted “assumed (as determined under section 357(d)) a liability of the taxpayer” for “assumed a liability of the taxpayer or acquired from the taxpayer property subject to a liability” and struck out “or acquisition (in the amount of the liability)” after “such assumption”.

Pub. L. 105–341997—Subsec. (h). amended heading and text of subsec. (h) generally. Prior to amendment, text read as follows: “For purposes of this section, real property located in the United States and real property located outside the United States are not property of a like kind.”

Pub. L. 101–508, § 11703(d)(1)1990—Subsec. (a)(2). , inserted at end “For purposes of this section, an interest in a partnership which has in effect a valid election under section 761(a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership.”

Pub. L. 101–508, § 11701(h)Subsec. (f)(3). , substituted “section 267(b) or 707(b)(1)” for “section 267(b)”.

Pub. L. 101–2391989—Subsecs. (f) to (h). added subsecs. (f) to (h).

Pub. L. 99–5141986—Subsec. (a)(3)(A). substituted “on or before the day” for “before the day”.

Pub. L. 98–369, § 77(a)1984—Subsec. (a). , in amending subsec. generally, designated existing provisions as par. (1), substituted “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” for “No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment”, and added pars. (2) and (3).

Pub. L. 91–1721969—Subsec. (e). added subsec. (e).

Pub. L. 86–3461959—Subsecs. (b) to (d). inserted references to section 1037(a) in subsecs. (b) and (c) and in first two sentences of subsec. (d).

Pub. L. 85–8661958—Subsec. (d). inserted in first sentence a comma between “exchanged” and “decreased” and “or decreased in the amount of loss”, and substituted in second sentence “subsection” for “paragraph”.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 13303(c)131 Stat. 2124

“(1)

In general .—

Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to exchanges completed after .
“(2)

Transition rule .—

The amendments made by this section shall not apply to any exchange if—
“(A)
the property disposed of by the taxpayer in the exchange is disposed of on or before , or
“(B)
the property received by the taxpayer in the exchange is received on or before .”
, , , provided that:

Effective Date of 2008 Amendment

Pub. L. 110–234Pub. L. 110–246Pub. L. 110–234section 4 of Pub. L. 110–246section 8701 of Title 7Amendment of this section and repeal of by effective , the date of enactment of , except as otherwise provided, see , set out as an Effective Date note under , Agriculture.

Pub. L. 110–234, title XV, § 15342(b)122 Stat. 1518Pub. L. 110–246, § 4(a)122 Stat. 1664

“The amendment made by this section [amending this section] shall apply to exchanges completed after the date of the enactment of this Act [].”
, , , and , title XV, § 15342(b), , , 2280, provided that:

Pub. L. 110–234Pub. L. 110–246Pub. L. 110–234section 4(a) of Pub. L. 110–246section 8701 of Title 7[ and enacted identical provisions. was repealed by , set out as a note under , Agriculture.]

Effective Date of 1999 Amendment

Pub. L. 106–36section 3001(e) of Pub. L. 106–36section 351 of this titleAmendment by applicable to transfers after , see , set out as a note under .

Effective Date of 1997 Amendment

Pub. L. 105–34, title X, § 1052(b)111 Stat. 941

“(1)

In general .—

The amendment made by this section [amending this section] shall apply to transfers after , in taxable years ending after such date.
“(2)

Binding contracts .—

The amendment made by this section shall not apply to any transfer pursuant to a written binding contract in effect on , and at all times thereafter before the disposition of property. A contract shall not fail to meet the requirements of the preceding sentence solely because—
“(A)
it provides for a sale in lieu of an exchange, or
“(B)
the property to be acquired as replacement property was not identified under such contract before .”
, , , provided that:

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11701(h)104 Stat. 1388–508, , , provided that the amendment made by that section is effective with respect to transfers after .

Pub. L. 101–508, title XI, § 11703(d)(2)104 Stat. 1388–517

“The amendment made by paragraph (1) [amending this section] shall apply to transfers after .”
, , , provided that:

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, § 7601(b)103 Stat. 2371

“(1)

In general .—

Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to transfers after , in taxable years ending after such date.
“(2)

Binding contract .—

The amendments made by this section shall not apply to any transfer pursuant to a written binding contract in effect on , and at all times thereafter before the transfer.”
, , , provided that:

Effective Date of 1986 Amendment

Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 77(b)98 Stat. 596Pub. L. 99–514, § 2100 Stat. 2095

“(1)

In general .—

Except as otherwise provided in this subsection, the amendment made by subsection (a) [amending this section] shall apply to transfers made after the date of the enactment of this Act [] in taxable years ending after such date.
“(2)

Binding contract exception for transfer of partnership interests .—

Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)) shall not apply in the case of any exchange pursuant to a binding contract in effect on , and at all times thereafter before the exchange.
“(3)

Requirement that property be identified within 45 days and that exchange be completed within 180 days .—

Paragraph (3) of section 1031(a) of the Internal Revenue Code of 1986 (as amended by subsection (a)) shall apply—
“(A)
to transfers after the date of the enactment of this Act [], and
“(B)
to transfers on or before such date of enactment if the property to be received in the exchange is not received before .
In the case of any transfer on or before the date of the enactment of this Act which the taxpayer treated as part of a like-kind exchange, the period for assessing any deficiency of tax attributable to the amendment made by subsection (a) [amending this section] shall not expire before .
“(4)

Special rule where property identified in binding contract .—

If the property to be received in the exchange is identified in a binding contract in effect on , and at all times thereafter before the transfer, paragraph (3) shall be applied—
“(A)
by substituting ‘’ for ‘’, and
“(B)
by substituting ‘’ for ‘’.
“(5)

Special rule for like-kind exchange of partnership interests .—

Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1986 (as amended by subsection (a)) shall not apply to any exchange of an interest as general partner pursuant to a plan of reorganization of ownership interest under a contract which took effect on , and which was executed on or before , but only if all the exchanges contemplated by the reorganization plan are completed on or before .”
, , , as amended by , , , provided that:

Effective Date of 1969 Amendment

Pub. L. 91–172, title II, § 212(c)(2)83 Stat. 571Pub. L. 99–514, § 2100 Stat. 2095

“The amendment made by paragraph (1) [amending this section] shall apply to taxable years to which the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies.”
, , , as amended by , , , provided that:

Effective Date of 1959 Amendment

Pub. L. 86–346section 203 of Pub. L. 86–346section 1037 of this titleAmendment by effective for taxable years ending after , see , set out as an Effective Date note under .

Effective Date of 1958 Amendment

Pub. L. 85–866section 1(c)(1) of Pub. L. 85–866section 165 of this titleAmendment by applicable to taxable years beginning after , and ending after , see , set out as a note under .

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .