Agricultural Economics Department


Date of this Version


Document Type

News Article


Farm and Ranch Management News (May 19, 2020).

Also available at

DOI: 10.13014/frm00011.


Copyright 2020, the author. Used by permission.


In part one of this series of articles, I touched on the idea that, when holding land as an investment, considering alternatives is important. We discussed the process of selling the ground, paying the capital gains and then investing in alternatives such as stocks. Here in part two, we will continue to consider the question of agricultural land being the correct investment for your portfolio but will take a different alternative approach. Now, we will look at like-kind exchanges.

1031 Like-Kind Exchange

With a 1031 like-kind exchange, we are taking a real property asset and exchanging it for another real property asset. Personal Property exchanges no longer fit under 1031 like-kind exchange (learn more in this 2018 CropWatch article). What is covered are exchanges in land. These exchanges could be an event like exchanging an inherited piece of farm ground in another state for one closer to home. By using 1031, you are deferring the payment of capital gains tax on the sale of real property. One caveat to remember is, even with land sales, you may still have Section 1245 real property that will be taxable. Things such as tiling, fence, irrigation pivots and other depreciable items will be fully taxable. If the property you are trading for also has 1245 property, the tax effect could cancel out.

Final thoughts on farm ground as an investment

All financial investments have some risk attached. It is important when building an investing portfolio to diversify your investments to spread and manage the risk to your preference. Farm ground is, and will continue to be, an intriguing investment option. The question that must be addressed is if it is the right investment for you.