Final answer:
The exchange of an office building located in Niagara Falls, NY, for one in Niagara Falls, Ontario, does not qualify as a like-kind exchange because U.S. tax law requires properties in a 1031 exchange to be located within the United States, and these properties are in different countries.
Step-by-step explanation:
No, the exchange does not qualify as like-kind because the properties are located in two different countries.
In the context of like-kind exchanges under U.S. tax law, specifically the Internal Revenue Code section 1031 (also known as a 1031 exchange), properties must be of like-kind and located within the United States to qualify. The term like-kind refers to the nature or character of the property, rather than its grade or quality. Real properties generally are of like-kind to each other if they are located in the United States.
However, property situated in the United States and property situated outside of the United States are not considered like-kind with respect to each other. In this scenario, since one property is in Niagara Falls, NY (U.S.) and the other is in Niagara Falls, Ontario (Canada), they are subject to different national jurisdictions and tax laws. This geographic distinction is a critical aspect of determining the eligibility for a 1031 exchange, which means that this particular investor's exchange would not meet the requirements set by the regulation.