Can you buy a business with a 1031 exchange?

Under federal tax laws, you can buy a business with a 1031 exchange. The property that you're selling in order to buy the business must be a like-kind property, which can be investment property or another business.

You cannot defer taxes on certain aspects of a business, such as inventory or stocks. These are not considered like-kind property, and you will have to pay the taxes on any gains for the tax year when the purchase is made. Read IRS Publication 544 for more details on buying a business with a 1031 exchange.

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