A 1031 exchange, named after Section 1031 of the Internal Revenue Code, is a tax deferred exchange that allows an individual or business to defer paying capital gains taxes when selling an investment property and purchasing a like-kind property. Louisiana, like other states, follows the federal guidelines for 1031 exchanges.
In Louisiana, the process begins by selling a qualifying investment property and identifying a replacement property within 45 days. The like-kind property must be of equal or greater value than the initial property. The individual or business then has 180 days to complete the purchase of the replacement property.
To qualify for a 1031 exchange in Louisiana, the properties involved must be held for investment, business, or income-producing purposes. Personal residences or property primarily used for personal purposes do not qualify.
It is important to note that while Louisiana recognizes the tax deferral benefits of a 1031 exchange, the state does not conform to all federal laws related to these exchanges. Specifically, Louisiana does not conform to the lengthened timeline provided by the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act.
To ensure compliance with both federal and state regulations, individuals or businesses considering a 1031 exchange in Louisiana should seek advice from qualified tax professionals or exchange companies.
