The short answer
A multi-asset exchange is an exchange in which more than one exchange group is created, or one exchange group holds more than one property, so gain and basis are computed under Reg. section 1.1031(j)-1 instead of property by property. The properties are sorted into exchange groups of like-kind property and a residual group for the difference in value. Since exchanges completed after 2017, only real property qualifies under section 1031, so furniture and equipment that travel with a building are taxable.
At a glance
| Exchange group | Properties given and received that are like kind to each other |
|---|---|
| Residual group | Money or other property making up any value difference |
| Gain recognized per group | Lesser of gain realized and the group's deficiency |
| Personal property | Not like-kind under section 1031 for exchanges completed after December 31, 2017 |
The regulation sorts every asset before any gain is measured.
Reg. section 1.1031(j)-1(b) requires the fair market value of every property given and received, and the adjusted basis of every property given. Like-kind properties are matched into exchange groups, liabilities assumed and relieved are netted, and any difference in value between the groups goes to a residual group of money or other property, drawn in order from asset Classes I through IV.
In each exchange group, gain recognized is the lesser of the gain realized and the exchange group deficiency, meaning the amount by which what you gave exceeds what you got. Losses in an exchange group are not recognized. Gain or loss on the residual group, and on property outside any group, is recognized under the normal sale rules.
Under the statute as amended in 2017, section 1031(a)(1) applies only to real property, for exchanges completed after December 31, 2017. Reg. section 1.1031(a)-3 defines real property for this purpose. Real property given and received that is of like kind forms an exchange group, and personal property becomes other property.
A hypothetical furnished building shows how the groups produce gain and basis.
Hypothetical: you give a building worth $900,000 with a $300,000 basis, plus its furniture worth $100,000 with a $20,000 basis, and receive an unfurnished building worth $1,000,000. No debt is involved. The two buildings form the exchange group, with a $100,000 surplus in your favor, so no gain is recognized in that group.
The furniture is not like kind to anything you received, so its $100,000 value fills the residual group and its $80,000 gain is recognized under the normal rules. Your basis in the new building is $300,000, plus the $100,000 exchange group surplus, or $400,000. Run your own allocation with your CPA, since the values you assign drive the result.
It bites when personal property or several parcels are bundled into one deal.
Reg. section 1.1031(k)-1(g)(7) treats personal property as incidental if it is customarily transferred with the real property and is worth no more than 15 percent of the replacement real property. That keeps your exchange safe harbor intact, but Example 6 of paragraph (g)(8) confirms the personal property is still taxable as boot, $100,000 in that example.
Furnished rentals, hotels and restaurants raise this most often; see furniture in a furnished rental. Splitting one sale into several replacement properties creates one exchange group with more than one property, and Form 8824 for multiple properties covers the reporting. Cash in the residual group is boot.
Related questions
Can I still exchange equipment for equipment?
Not under section 1031 for exchanges completed after December 31, 2017. Section 1031(a)(1) now covers only real property held for use in a trade or business or for investment.
Who decides how value is split between building and furniture?
The regulation requires a fair market value for each property. Agreeing an allocation in the purchase contract gives you a documented starting point, but the values must be supportable.
Do losses in one group offset gain in another?
No. Losses realized in an exchange group are not recognized, and each group is tested separately under Reg. section 1.1031(j)-1(b)(3).
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.