To qualify for a Tax Deferred Exchange, the exchanger must exchange the original investment property for a "like kind" replacement property or properties. It is at this point that many investors become confused.

We often hear the question: "Does 'like kind' mean that I must trade my apartment building for another apartment building or must I trade my commercial office building for another commercial office building?" 

When the tax code talks about "like kind" property, the meaning is quite simple. An investor can trade any type of investment property or property held for trade or business, for any other type of investment property or property held for trade or business. This means that an investor can trade an apartment building for a commercial building or for a working farm or for an industrial building etc.

What an investor cannot do is trade investment property for a personal residence and vice versa. It is, however, possible to convert a personal residence to investment property by renting it and then at a later date, exchanging it for investment property.

Why should I exchange?

What are the most common types of exchanges?

Tax Deferred Exchanges of Property - Mistakes, Misconceptions and Traps, by Gilbert F. Dukes, III, Esq.