Personal property held for investment or business use can be exchanged for like-kind property. This includes tangible property such as aircraft, fleet vehicles, fine art, heavy equipment and machinery; and intangible property such as liquor licenses, copyrights, franchise agreements and domain names. When sold without a 1031 exchange, these items may be subject to capital gains tax due to depreciation of assets in the company books. A 1031 can defer capital gains tax as well as depreciation recapture. Like-kind replacement property must be of the same General Asset Class or Product Class and must be held for investment or business use.

General Asset Classes

General Asset Classes are set forth in Treasury Regulation §1.1031(a)-2.

  1. Office furniture, fixtures, and equipment (asset class .11)
  2. Information systems (asset class .12)
  3. Data handling equipment, except computers (asset .13)
  4. Airplanes (airframes and engines) except those used in commercial or contract carrying of passengers or freight, and all helicopters (airframes and engines) (asset class .21)
  5. Automobiles, taxis (asset class.22)
  6. Buses (asset class.23)
  7. Light general-purpose trucks (asset class .241)
  8. Heavy general-purpose trucks (asset class .242)
  9. Railroad cars and locomotives, except those owned by railroad transportation companies (asset class .25)
  10. Tractor units for use over-the-road (asset class.26)
  11. Trailers and trailer-mounted containers (asset class .27)
  12. Vessels, barges, tugs, and similar water-transportation equipment (asset class .28)
  13. Industrial steam and electric generation and/or distribution systems (asset class.4)

Product Class

Product classes are defined by the North American Industry Classification System (NAICS). See the link below for the table of product classes. All applicable classes in the manufacturing sector are six-digit codes beginning with 31, 32 and 33.

http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2007

A Ten Thirty-One Exchange Corp. 2011 Botulph Road
Suite 200
Santa Fe, NM 87505
505-982-1031 phone
505-982-5211 fax
800-500-1031