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For US taxes, in practice, can one execute a Tax free exchange (1031) of rental residential property which is located outside the US?

1031 Tax Deferred Exchange
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Brian Weaver, CPA, MBA
No, foreign property is not like-kind to United States-based property which only includes the 50 states and the District of Columbia. (IRC §1031(h) and §7701(a)(9)). Also, property located in other U.S. Territories, such as Puerto Rico, is not like-kind to property located within the United State with a limited exception for Guam and the Northern Mariana Islands.
Leave a Comment 204 weeks ago

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Michael Atlas, CPA, CA
And, even if you could do it, it might not be a smart move anyway. Most taxable jurisdictions levy taxes on non-residents who realize gains from the sale of real estate within their borders, and they certainly would not recognize any tax-deferred exchange in the US. Hence, if you are going to pay foreign taxes in any event, better to be able to get a stepped-up basis for US tax purposes and be able to claim the foreign tax credit against the US taxes.
Reply 203 weeks ago


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