While U.S. tax law requires that both the relinquished and replacement properties be located within the United States for a 1031 exchange, international investors and U.S. investors with foreign holdings have unique considerations. We work through the intersection of U.S. tax law and international real estate investment with every client.
The Like-Kind Rule for International Properties
Under IRS rules, U.S. real property is not considered like-kind to foreign real property. This means you cannot exchange a U.S. property for a property located outside the United States. However, foreign investors who own U.S. real property can participate in 1031 exchanges for other U.S. properties.
- U.S. property must be exchanged for U.S. property
- Foreign property must be exchanged for foreign property
- Foreign investors can exchange U.S. properties within the U.S.
- FIRPTA withholding rules apply to foreign sellers
FIRPTA and Foreign Investors
Foreign investors selling U.S. real property are subject to FIRPTA withholding requirements. A 1031 exchange can defer the FIRPTA withholding obligation, but the exchange must be properly structured. We work with international clients and their tax advisors to ensure full compliance.
International Real Estate & 1031 Exchanges: What You Need to Know
Steve addresses the most common questions from international investors about 1031 exchanges — including FIRPTA withholding, the like-kind rule for foreign properties, and how foreign investors can participate in U.S. 1031 exchanges.