§ 1031. Exchange of real property held for productive use or investment

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 302 · 68A Stat. 302

   Enacted · 26 U.S.C. § 1031

   Aug. 16, 1954, ch. 736, 68A Stat. 302

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 302

2. 1958

   Technical Amendments Act of 1958

   Pub. L. 85–866 title I § 44 · 72 Stat. 1606

   1. Inserted · 26 U.S.C. § 1031(d)

      Pub. L. 85–866 inserted in first sentence a comma between “exchanged” and “decreased” and “or decreased in the amount of loss”

   2. Substituted · 26 U.S.C. § 1031(d)

      Pub. L. 85–866 substituted in second sentence “subsection” for “paragraph”

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 85–866 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”.

   Enacted provision · exact public law section
   SEC. 44. PROPERTY ACQUIRED IN TAX-FREE EXCHANGE. (a) Basis.— The first sentence of section 1031 (d) (relating to basis 26 USC 1031. of property acquired in certain tax-free exchanges) is amended to read as follows: “If property was acquired on an exchange described in this section, section 1035 (a), or section 1036 (a), then the basis shall be 26 USC 1035, 1036. 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.” (b) Clerical Amendment.— The second sentence of section 1031 (d) is amended by striking out “paragraph” and inserting in lieu thereof “subsection”.

3. 1959

   Pub. L. 86–346 title II § 201(c) · 73 Stat. 621

   Inserted · 26 U.S.C. § 1031(b)(d)

   Pub. L. 86–346 inserted references to section 1037(a) in subsecs. (b) and (c) and in first two sentences of subsec. (d)

   Source evidence

   Code amendment note
   Subsecs. (b) to (d). Pub. L. 86–346 inserted references to section 1037(a) in subsecs. (b) and (c) and in first two sentences of subsec. (d).

   Enacted provision · exact public law section
   (c) Section 1031(b) of such Code (relating to gain from exchanges of property not solely in kind) is amended by striking out “the pro-visions of subsection (a), of section 1035(a), or of section 1036(a),” and inserting in lieu thereof “the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a),”.

4. 1969

   Tax Reform Act of 1969

   Pub. L. 91–172 title II § 212(c)(1) · 83 Stat. 487

   Added · 26 U.S.C. § 1031(e)

   Pub. L. 91–172 added subsec. (e)

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 91–172 added subsec. (e).

   Enacted provision · exact public law section
   (1) Not to be treated as like kind exchanges.— Section 1031 68A Stat. 302. 26 USC 1031. (relating to exchange of property held for productive use or for investment) is amended by adding at the end thereof the following new subsection: “(e) Exchanges of Livestock of Different Sexes.— For purposes of this section, livestock of different sexes are not property of a like kind.”

5. 1984

   Tax Reform Act of 1984

   Pub. L. 98–369 § 77(a) · 98 Stat. 494

   1. Changed · 26 U.S.C. § 1031(a)

      Pub. L. 98–369, § 77(a), in amending subsec. generally

   2. Amended · 26 U.S.C. § 1031(a)

      Pub. L. 98–369, § 77(a), in designated existing provisions as par. (1)

   3. Substituted · 26 U.S.C. § 1031(a)

      Pub. L. 98–369, § 77(a), in 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”

   4. Added · 26 U.S.C. § 1031(a)

      Pub. L. 98–369, § 77(a), in added pars. (2) and (3)

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 98–369, § 77(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).

   Enacted provision · exact public law section
   (a) In General.— Subsection (a) of section 1031 (relating to nonrecognition 26 USC 1031. of gain or loss from exchanges solely in kind) is amended to read as follows: “(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 property held for productive use in a trade or business or for investment if sucn 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. “(2) Exception.— 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. “(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 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.”

6. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XVIII § 1805(d) · 100 Stat. 2085

   Substituted · 26 U.S.C. § 1031(a)(3)(A)

   Pub. L. 99–514 substituted “on or before the day” for “before the day”

   Source evidence

   Code amendment note
   Subsec. (a)(3)(A). Pub. L. 99–514 substituted “on or before the day” for “before the day”.

   Enacted provision · exact public law section
   (d) Amendment Related to Section 77 of the Act.— Subparagraph (A) of section 1031(a)(3) (relating to requirement that property be identified) is amended by striking out “before the day” and inserting in lieu thereof “on or before the day”.

7. 1989

   Revenue Reconciliation Act of 1989

   Pub. L. 101–239 title VII § 7601(a) · 103 Stat. 2106

   Added · 26 U.S.C. § 1031(f)(h)

   Pub. L. 101–239 added subsecs. (f) to (h)

   Source evidence

   Code amendment note
   Subsecs. (f) to (h). Pub. L. 101–239 added subsecs. (f) to (h).

   Enacted provision · exact public law section
   (a) Special Rules for Exchanges Between Related Persons, Etc.— Section 1031 (relating to exchange of property held for productive use or investment) is amended by adding at the end thereof the following new subsections: “(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 non recognition 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). “(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 Rule for Foreign Real Property.— 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.”

8. 1990

   Revenue Reconciliation Act of 1990

   Pub. L. 101–508 § 11703(d)(1) · 104 Stat. 1388

   Inserted · 26 U.S.C. § 1031(a)(2)

   Pub. L. 101–508, § 11703(d)(1), 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.”

   Source evidence

   Code amendment note
   Subsec. (a)(2). Pub. L. 101–508, § 11703(d)(1), 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.”

   Enacted provision · exact public law section
   (1) In general.— Paragraph (2) of section 1031(a) is amended by adding at the end thereof the following new sentence: “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.”

9. 1990

   Revenue Reconciliation Act of 1990

   Pub. L. 101–508 § 11701(h) · 104 Stat. 1388

   Substituted · 26 U.S.C. § 1031(f)(3)

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

   Source evidence

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

   Enacted provision · exact public law section
   (h) Amendment Related to Section 7601.— Effective with respect to transfers after August 3, 1990, paragraph (3) of section 1031(f) is amended by striking “section 267(b)” and inserting “section 267(b) or 707(b)(D”.

10. 1997

    Pub. L. 105–34 title X § 1052(a) · 111 Stat. 788

    Amended · 26 U.S.C. § 1031(h)

    Pub. L. 105–34 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.”

    Source evidence

    Code amendment note
    Subsec. (h). Pub. L. 105–34 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.”

    Enacted provision · exact public law section
    (a) In General.— Subsection (h) of section 1031 (relating to exchange of property held for productive use or investment) is amended to read as follows: “(h) Special Rules for Foreign Real and Personal Property.— For purposes of this section— “(1) Real property.— Real property located in the United States and real property located outside the United States are not property of a like kind. “(2) Personal property.— “(A) In general.— Personal property used predominantly within the United States and personal property used predominantly outside the United States are not property of a like kind. “(B) Predominant use.— Except as provided in subparagraph (C) and (D), the predominant use of any property shall be determined based on— “(i) in the case of the property relinquished in the exchange, the 2-year period ending on the date of such relinquishment, and “(ii) in the case of the property acquired in the exchange, the 2-year period beginning on the date of such acquisition. “(C) Property held for less than 2 years.—Except in the case of an exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection— “(i) only the periods the property was held by the person relinquishing the property (or any related person) shall be taken into account under subparagraph (B)(i), and “(ii) only the periods the property was held by the person acquiring the property (or any related person) shall be taken into account under subparagraph (B)(ii). “(D) Special rule for certain property.— Property described in any subparagraph of section 168(g)(4) shall be treated as used predominantly in the United States.”.

11. 1999

    Miscellaneous Trade and Technical Corrections Act of 1999

    Pub. L. 106–36 title III § 3001(c)(2) · 113 Stat. 127

    1. Substituted · 26 U.S.C. § 1031(d)

       Pub. L. 106–36, 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”

    2. Struck · 26 U.S.C. § 1031(d)

       Pub. L. 106–36, in last sentence, struck out “or acquisition (in the amount of the liability)” after “such assumption”

    Source evidence

    Code amendment note
    Subsec. (d). Pub. L. 106–36, 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”.

    Enacted provision · exact public law section
    (2) Section 1O31.— The last sentence of section 1031(d) of such Code is amended— (A) by striking “assumed a liability of the taxpayer or acquired from the taxpayer property subject to a liability” and inserting “assumed (as determined under section 357(d)) a liability of the taxpayer”; and (B) by striking “or acquisition (in the amount of the liability)”.

12. 2005

    Tax Technical Corrections Act of 2005

    Pub. L. 109–135 title IV § 412(pp) · 119 Stat. 2577

    Substituted · 26 U.S.C. § 1031(h)(2)(B)

    Pub. L. 109–135 substituted “subparagraphs” for “subparagraph” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (h)(2)(B). Pub. L. 109–135 substituted “subparagraphs” for “subparagraph” in introductory provisions.

    Enacted provision · exact public law section
    (pp) The matter preceding clause (i) of 26 USC 1031. section 1031(h)(2)(B) is amended by striking “subparagraph” and inserting “subparagraphs”.

13. 2008

    Food, Conservation, and Energy Act of 2008

    Pub. L. 110–246 § 4(a) · 122 Stat. 1651

    Added · 26 U.S.C. § 1031(i)

    Pub. L. 110–246 added subsec. (i)

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 110–246 added subsec. (i).

    Enacted provision · exact public law section
    (a) In General.— The Act entitled “An Act to provide for the continuation of agricultural programs through fiscal year 2012, and for other purposes” (H.R. 2419 of the 110th Congress), and the amendments made by that Act, are repealed, effective on the date of enactment of that Act.

14. 2017

    Pub. L. 115–97 § 13303(b)(5) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 1031

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

    Source evidence

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

    Enacted provision · exact public law section
    (5) The heading of section 1031 is amended by striking “property” and inserting “real property”.

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

15. 2017

    Pub. L. 115–97 § 13303(a) · 131 Stat. 2054

    Substituted · 26 U.S.C. § 1031(a)(1)

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

    Source evidence

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

    Enacted provision · exact public law section
    (a) In General.— Section 1031(a)(1) is amended by striking “property” each place it appears and inserting “real property”.

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

16. 2017

    Pub. L. 115–97 § 13303(b)(1)(A) · 131 Stat. 2054

    Amended · 26 U.S.C. § 1031(a)(2)

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

    Source evidence

    Code amendment note
    Subsec. (a)(2). Pub. L. 115–97, § 13303(b)(1)(A), 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.”

    Enacted provision · exact public law section
    (A) Paragraph (2) of section 1031(a) is amended to read as follows: “(2) Exception for real property held for sale.— This subsection shall not apply to any exchange of real property held primarily for sale.” .

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

17. 2017

    Pub. L. 115–97 § 13303(b)(2) · 131 Stat. 2054

    1. Added · 26 U.S.C. § 1031(e)

       Pub. L. 115–97, § 13303(b)(2), (3), added subsec. (e)

    2. Struck · 26 U.S.C. § 1031(e)

       Pub. L. 115–97, § 13303(b)(2), (3), 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.”

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 115–97, § 13303(b)(2), (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.”

    Enacted provision · exact public law section
    (2) Section 1031 is amended by striking subsection (e).

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

18. 2017

    Pub. L. 115–97 § 13303(b)(4) · 131 Stat. 2054

    Amended · 26 U.S.C. § 1031(h)

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

    Source evidence

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

    Enacted provision · exact public law section
    (4) Section 1031(h) 26 USC 1031. is amended to read as follows: “(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.” .

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

19. 2017

    Pub. L. 115–97 § 13303(b)(1)(B) · 131 Stat. 2054

    Struck · 26 U.S.C. § 1031(i)

    Pub. L. 115–97, § 13303(b)(1)(B), 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—

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 115–97, § 13303(b)(1)(B), 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.”

    Enacted provision · exact public law section
    (B) Section 1031 is amended by striking subsection (i).

    Effective date note
    Pub. L. 115–97, title I, § 13303(c), Dec. 22, 2017, 131 Stat. 2124, provided that:

24 of 25 references resolved to an enrolled provision · 1 partial