cancel
Showing results for 
Search instead for 
Did you mean: 
FarmersTan
Contributor

1031 Exchange

I invested some money in the stock market a few years ago at the near market lows, and am thinking about pulling it out to use in my operation.  Can I sell my stock and purchase cattle and use a 1031 to avoid capital gains taxes? 

0 Kudos
10 Replies
Kay/NC
Honored Advisor

Re: 1031 Exchange

You need to ask your CPA.  

 1031 exchanges used to be very restrictive, and got much more liberal, but I thought they still required a like-kind purchase to avoid the capital gains tax. 

0 Kudos
FarmersTan
Contributor

Re: 1031 Exchange

I think that you are right.  My tax man is busy and i havent been able to contact him , that time of year.  Some things that id read led me to believe that i could do it, so i thought someone might have experience with it.  Ive owned the stock for over a year so i woudlnt get as big of hit on the capital gains. 

 

 

0 Kudos
rodder7
Contributor

Re: 1031 Exchange

No you can't , for two reasons, one you can't do section 1031 exchanges with securities such as stocks, second 1031 exchanges must be like kind property, so no and no,

 

0 Kudos

one word: NO

Stocks and livestock or any other assets are not like-kind exchanges.  A 1031 exchange only is allowable when you sell one kind of asset, say a house that was a rental and purchase another rental house.  "Like-kind exchanges are the only way it is legal.  Stocks do not qualify for like-kind exchanges with land or other real estate. 

0 Kudos
kraft-t
Senior Advisor

Re: 1031 Exchange

I think the 1031 is not available in this instance.

 

You still have options. Cash it in and pay minimal capitol gains taxes and use your money for investment in your own business.

 

Or you can hold the stocks and borrow the money for the business. It depends on whether the invested money will deliver higher returns than the borrowed money  will cost you.

 

Some times it is a better use of money to invest in yourself and your enterprise. I would put my own business first as an investment vehicle. However others have done the opposite and are satisfoied with the results. I cashed mine in and bought a farm and that worked well.

0 Kudos
James22
Senior Contributor

Re: 1031 Exchange

Don't think so.  Doesn't require land for land, but believe it does require "real estate for real estate";  i.e., you could trade an apartment complex for farm ground.

Tags (1)
0 Kudos
rodder7
Contributor

Re: one word: NO

You can't just sell one property and buy another, it has to be done through an intermediary, it must be properly planned that way before you do it, if you just sell and get the money and buy another you did not do a 1031 exchange and you are SOL.

 

 

0 Kudos
FarmersTan
Contributor

Re: 1031 Exchange

Thats really where im at now.  Im young and had some money saved up for an ag purchase but the stock market was near all time lows and i couldnt see not getting in.  I did really well on what I invested and now i want to pull it out and invest it in myself.  Since ive had the stocks for over a year its not the huge capital gains tax hit, but thought someone on here might know if there was a way to do a 1031 or something similar.  Great thing is that I can take out what im needing to start a cattle herd and still leave in my origional investment. 

 

Im really looking at the cows as an investment anyway i wont see a return on them for at least 2 years.

0 Kudos

Re: one word: NO

Correct.  I've done two of these exchanges.  The rules must be followed to the letter or the IRS will make a negative determination.

0 Kudos