The Hierarchy of Farm 1031 Exchanges

We continue to get questions on how farm 1031 exchanges are taxed

Photo by Marc Wieland on Unsplash

We continue to have emails or calls regarding how tax-deferred exchanges of farm real estate is taxed. The Tax Cuts and Jobs Act of 2017 eliminated the ability to defer tax on personal property but retained it for real property.

However, farm real property is not comprised of just one type of “tax” property but rather three types as follows:

• Land - Land is taxed at capital gains rates if it has been owned for more than a year. Land can be exchanged for any other real property including the following two types of properties. To fully defer the gain on land, you must reinvest the net sales price and all of the cash.