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Answer :
Final answer:
A 1031 exchange refers to the trade of one business or investment asset for another, with tax deferment. The exchange must involve similar kinds of properties. In the given scenarios, trading a rental condominium for a recreational vehicle would not qualify as a 1031 exchange. B. A rental condominium for a recreational vehicle would not qualify as a 1031 exchange.
Explanation:
A 1031 exchange, also known as a like-kind exchange, is a strategy used in U.S. tax law that permits a taxpayer to exchange one type of investment property for another, deferring the recognition of the capital gains tax that would normally be due. The properties must be of 'like kind' and both properties must be held for a productive purpose in trade or business or for investment purposes.
This is because a recreational vehicle is not classified as real property under U.S. tax law, whereas a rental condominium is. Therefore, these two things are not 'like kind' and the exchange would not meet the requirements of a 1031 exchange.
On the other hand, properties of examples A, C, and D are considered 'like-kind' properties under U.S. tax law and would be eligible for a 1031 exchange.
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