As per IRC Section 1031, a properly structured 1031 Exchange will allow an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. Under the replacement property acquired, it is necessary that the like-kind shouldn’t have a variation in its grade or quality and may include: Office Buildings, Storage Facilities, Industrial Facilities, Retail Shopping Centers, Single Family Rentals, Multi-Family Rentals, and Raw Land.
A like-kind property concerns to two assets that are the same type which in turn makes an exchange between them being tax deferrable. The two assets need to be of the same kind but are not mandatory required to be of the same quality to qualify as like-kind property.
Properties that are held for investment usually does not require to produce cash flow or income through the same. All that is to be achieved by them is to be held for investment to qualify for 1031 exchange treatment. There are other means through which a person could acquire and use a property or asset in their trade or business and qualify for tax-deferred exchange treatment.