leasehold interest

[icoffman]

Can I exchange into a leasehold interest?

[admin]

Leasehold interests may be either relinquished property or replacement property in an exchange. [Reg. §1.1031(a)-1(c)(2)] A leasehold interest with a term of 30 years or more remaining is considered like-kind property to a fee interest in any other real estate held for productive use in a trade or business or for investment. Also, if a lease provides for optional renewal periods, these periods can be included in determining whether the leasehold has 30 years or more remaining. In one case, a lease with an initial term of 5 years and ten optional renewal periods of 5 years each was held to be "like-kind" property since the taxpayer had the right to use the property for up to 55 years. [R & J Furniture Co. v. Comm., 20 T.C. 857 (1953)]

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