1031 Exchange with Foreign Property Factsheet

You can defer taxes through a like-kind exchange with property located outside the United States, but to do so successfully requires a knowledgeable partner.

Most property owners are familiar with IRC Section 1031, which allows for the deferral of capital gains, depreciation recapture, and certain other taxes on the sale of business or investment property when the proceeds are used to acquire a like-kind property.

What many property owners don’t know is that it’s possible to perform a like-kind exchange with property owned in foreign countries. Section 1031 applies to foreign property as well as domestic, with one key rule: property in the United States and property outside the United States are not considered like kind.

In theory, a foreign exchange can be a great way to maximize tax savings while moving a business to another country or taking advantage of real estate opportunities abroad. In practice, it can be a minefield of regulatory and cultural issues.

In this factsheet, we explain how a foreign property exchange works, the risks involved, and what a global partner like JTC can add to your exchange.

Topics covered include:

• Tax treaties and avoiding double taxation
• Remittance limits, currency conversion, and other risks of foreign exchanges
• The benefits of a QI with a local presence in the countries where property is held
• Questions to ask before pursuing a foreign exchange

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