Can I 1031 Exchange Into Foreign Property?

“As a general rule, US taxpayers are taxed on their worldwide income. That means whether or not you reside in the United States or overseas if you are a US Citizen, Legal Permanent Resident, or Foreign National subject to US Tax (such as the Substantial Presence Test) then you must report and pay tax on your worldwide income (foreign earned incomes exclusion and foreign tax credit may apply).
It goes on to say,

If you have foreign property and you are seeking to transfer the property in exchange for another foreign property to avoid tax consequences, the 1031 exchange rules apply to foreign property. In other words, you can transfer/exchange one foreign property for another foreign property just as you would a domestic property for domestic property and still obtain the 1031 tax benefits.”

Read the rest of their breakdown Here

The whole article touches on the basics, worldwide income, foreign property, “boot”, tax treaties, and more.

Also, Cornell Law has it very concisely put:

(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.

Back to the question I get – Am I allowed to exchange my investment property(s) in the US with foreign property(s)?

It seems the answer is No – according to the “offshore tax disclosure” attorneys and Cornell Law School, foreign and domestic properties do not share a “Like-Kind” quality. I believe that is my final answer as well. Let me know if you find a loop in the IRC though, I’d love to hear it.

We cannot provide advice on legal or tax consequences. Please seek the advice of an attorney or accountant. We are not responsible for any decision made regarding your portfolio or properties nor are we acting, in any way, as an advisor for or to you. PLEASE SPEAK TO YOUR LEGAL & FINANCE TEAMS BEFORE MAKING ANY INVESTMENT OR DIVESTMENT.

Published by Brett Littlewood

Brett Littlewood was born in La Jolla and has been in business for over a decade. He is surrounded by his family, friends, and network of experts across many industries and professions. Brett has been working with clients regarding real estate, wealth strategies, and marketing along the coast of California. With his extensive skills and mastery of the San Diego market, he is a knowledgeable and visionary leader. Brett prides himself in the personalized attention he gives to his clients unique needs. He can help you with your residential, investment, and commercial properties. His team specializes in the sale and acquisition of 1031 Tax Deferred Exchanges.

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