There is a double test for real estate to qualify for IRC tax deferral §1031.
Both abandoned and replacement properties must be held by the exchanger for investment or productive use in a business or enterprise. The purpose and intention of the exchanger to retain ownership is the critical test. The use of the property by other parties involved in the exchange (buyers of abandoned properties or sellers of replacement properties) is irrelevant.
The “Abandoned” and “Replace” properties must also be “similar”. The term “like” refers to the type or character of the property, ignoring any quality or difference in quality. For example, a property that has not improved is considered equivalent to an improved property because the lack of improvement is a distinction between quality or quality. The basic real estate character of both properties is the same. Fiance. Reg. §1.1031 (a) -1 (b). In essence, all real estate in the United States is “like” any other residential property.