Like-Kind Property Law and Legal Definition
Any two properties that are considered to be the same type, making an exchange between them tax free. Also called a like-kind exchange, it allows for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset. To qualify as like kind, two assets must be of the same character but need not be of the same grade or quality. Section 1031 of the U.S. Internal Revenue Service Code allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Several requirements must be met to ensure that tax liability is not created. The asset being sold must be an investment property and the asset being purchased must be similar to old property. The new property has to be identified and purchased within a certain period of the sale of old property.