Leasehold Interest
A leasehold interest is the right to possess and use real estate for a term under a lease — distinguished from fee simple ownership. Long-term leaseholds (30+ years) are treated as real property for 1031 exchange purposes.
What it means
A leasehold interest arises under a lease: the tenant holds a possessory interest for the lease term while the landlord retains fee simple. Commercial ground leases are typical examples, often 30–99 years.
For federal tax purposes, a leasehold interest with remaining term of 30 years or more (including options) is treated as real property and qualifies as like-kind for 1031 exchanges. Shorter-term leaseholds do not. This makes long-term ground lease positions potentially exchangeable like fee simple real estate.
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