“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).
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:
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.