What is a 1031 exchange?

A 1031 exchange, named after Section 1031 of the U.S. Internal Revenue Code, allows real estate investors to defer capital gains tax by reinvesting the proceeds from the sale of a business or investment property into another 'like-kind' property. When it comes to foreign properties, the same principle applies.

What are the 1031 exchange rules for foreign property?

The 1031 exchange rules for property held internationally are the same as for property located predominantly in the United States. Foreign property is not considered like kind with property held in the US or vice versa. A brief review of the primary exchange rules follows.

Can an International Citizen Exchange a 1031?

An international citizen who either maintains US citizenship or is a non-resident alien and is subject to US federal income taxes can initiate a 1031 exchange to defer their US federal capital gain on investment property held internationally. The replacement property can be in the country of origin or elsewhere, though not in the US.