Have any of you ever sold real estate and used a 1031 exchange to roll the money over into a REIT? If so, how did it work?
Real estate investors frequently ask the question “Can I do a 1031 exchange of the relinquished property proceeds into a REIT (Real Estate Investment Trust) as replacement property?” REITs are entities that own and manage portfolios of real estate that are typically diversified by industry, geography and tenant and there are many features to REITs, including professional management, diversification and the potential for current monthly dividends and stock growth. However, an investor cannot do a 1031 exchange into shares of a REIT because the shares of a REIT are considered personal property even though the REIT, at the entity level, owns real property assets. Investors seeking 1031 exchange tax deferral must exchange property that is considered “like-kind” property which means exchanging real property held for investment or business purposes for other real property held in the same manner. REIT shares are not like-kind to real property.