1031 Exchange Services

Private Letter Ruling No. 1981-03117 (PLR 198103117)

Internal Revenue Service (I.R.S.)

Private Letter Ruling

October 27, 1980

Section 1031 — Exchange of Property Held for Productive Use or Investment



X = * * *

$100x = * * *


Dear ***:

This is in reply to a letter dated August 27, 1980, as supplemented by your letter dated September 12, 1980, requesting a ruling regarding the federal income tax consequences of an exchange of certain real property.

You state that in 1963 you purchased a house and lot in X that has never been used as your principal residence.   This property was intermittently rented and used for your personal benefit.   During the past 6 or 7 years, the house has not been rented and you have occupied it approximately 10 days per year for maintenance purposes.

In 1969 you purchased an unimproved lot, also located in X, which, since your purchase, has not been used for any purpose by you.   The stated purpose of both purchases was to provide for personal enjoyment of the community and also to make a sound real estate investment in a growing community.   You also represent that you are not realtors and have not purchased or sold any property since 1969.

You state that you are contemplating the exchange of both pieces of real property located at X along with a payment of $100x for another house and lot also located at X.   This is to be effected by a single exchange transaction. Nothing in this transaction will affect your principal residence.   The house and lot you acquire in this trade will be held for the same purposes as the properties exchanged therefore:  to provide for personal enjoyment of the community and to make a sound real estate investment.

Section 1001(c) of the Internal Revenue Code provides that except as otherwise provided in this subtitle, the entire amount of gain or loss determined under this section on the sale or exchange of property shall be recognized.

Section 1031(a) of the Code provides that 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.

Accordingly, provided that both the property you will receive and the property you will exchange qualify as property held or to be held for productive use in a trade or business or for investment purposes, the proposed exchange will be an exchange of like kind property within the meaning of section 1031(a) of the Code, and as a result no gain or loss will be recognized by you upon the exchange.

Except as specifically ruled upon, no opinion is expressed as to the federal income tax consequences of the transaction described above under any other provision of the Code.

A copy of this letter should be attached to your federal income tax return for the taxable year in which the transaction is consummated.   A copy is enclosed for this purpose.

Sincerely yours,


Anthony Manzanares, Jr.


Individual Income Tax Branch

This document may not be used or cited as precedent.



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