Which property exchange would likely qualify for tax-deferral benefits under a 1031 exchange?

In the context of a 1031 exchange, the primary criterion for tax-deferral benefits is that the properties involved must be considered investment or business properties and must be of "like-kind." This means they need to belong to the same category of asset, such as real property for real property exchanges.

Exchanging a vacant lot for a gas station fits well within these parameters. Both properties are held for investment or business purposes, and they qualify as like-kind since they are both real estate. Under the 1031 exchange rules, this transaction would typically allow for the deferral of capital gains taxes as long as specific guidelines are followed.

The other scenarios do not meet the qualifications as clearly: A free-standing store and a strip mall, while both real estate, may not meet the like-kind criteria due to different uses and operational complexities involved between U.S. and Mexican properties. A personal residence exchanged for an office building fails because personal residences do not qualify under 1031 regulations, as only investment properties can be exchanged in this manner. Finally, a yacht and a parking lot involve entirely different asset classes—one is personal property (the yacht) and the other is real estate, which disqualifies them from tax-deferral under a 103