What are "like-kind" properties in relation to a 1031 Tax Deferred Exchange?

In the context of a 1031 Tax Deferred Exchange, "like-kind" properties refer to properties that can defer capital gains tax when exchanged. This means that if an investor swaps one investment property for another, they can avoid paying immediate capital gains taxes that would typically be due on the sale of the first property. The primary requirement for properties to qualify as like-kind is that they must both be held for investment or business purposes.

This exchange mechanism allows investors to continue growing their investment portfolio without being burdened by capital gains tax liabilities at the time of the exchange. By utilizing this exchange, investors can reinvest the proceeds from the sale into another property, thereby potentially increasing their wealth and investment opportunities over time.

The other options do not accurately capture the essence of like-kind properties in the context of a 1031 exchange. For instance, similarity in size, qualification for full depreciation, or being sold above market value do not define the criteria for what makes properties like-kind under this specific tax deferment rule.