IRC Sec. 1031 provides that "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", IRC Sec. 1031(a)(1).
The following requirements must be met to effect a tax free exchange:
- Property, whether real or personal, is required.
- Property must be held for a qualified purpose
- Property relinquished must be like-kind with replacement property
- An exchange is required.