1031, Tax Deferred, Tax Free, Starker, and Like Kind Exchange. What do all of these monikers mean to you? They all refer to what is virtually the last legal method for allowing taxpayers to defer capital gains tax on the sale of investment or business property. One basic premise is determining which property is qualified for preferred treatment under IRC Section 1031. Qualifying property has little to do with its character or structure, and everything to do with the intended use for which the property is held. 

An excerpt from IRC 1031 states, "No gain or loss shall be recognized on the exchange of property held for productive use in a trade, business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."

The key is determining what is considered to be "Like Kind". In real property exchanges, this definition provides the broadest benefit - real property for real property - dirt for dirt. That might beg the question as to whether personal residences, second homes, mountain villas, beach condos, which are all considered 'investments' in the taxpayers eyes, may qualify for such treatment.