An Agricultural Land Exchange, also known as a 1031 exchange of agricultural property, is a specialized type of real estate transaction that allows farmers, ranchers, and other agricultural landowners to sell their property and reinvest the proceeds into new agricultural property, while deferring the payment of capital gains taxes.
This type of exchange is governed by section 1031 of the Internal Revenue Code, which allows property owners to exchange one investment property for another of like kind, without triggering a taxable event. In the case of agricultural land, the term “like-kind” refers to land that is used for farming, ranching, or timber production.
The process of completing an Agricultural Land Exchange involves working with a qualified intermediary, who acts as a neutral third party to facilitate the exchange. The intermediary helps the property owner sell their current property and holds the proceeds in escrow until a suitable replacement property can be identified and purchased.
Once a replacement property is found, the intermediary uses the proceeds from the sale of the original property to purchase the new property on behalf of the property owner. This allows the property owner to defer the payment of capital gains taxes, which can be a significant financial benefit.
At 1031 Exchange Place, we specialize in helping agricultural landowners navigate the complex process of completing a 1031 exchange of agricultural property. Our team of experts has years of experience in the industry and can guide you through every step of the exchange process, from identifying replacement properties to closing the transaction.