Beginning with exchanges completed after May 22, 2008, the exchange of stock in a mutual ditch, reservoir, or irrigation company may qualify for the nonrecognition of gain or loss under section 1031.

The nonrecognition of gain or loss on the exchange may apply if, at the time of the exchange:

1. The company is a section 501(c)(12)(A) organization (determined without regard to the percentage of income collected from members for the purpose of meeting losses and expenses), and
2. The shares of stock in the company have been recognized by the highest court in the state in which the company was organized or by an applicable statute of that state as constituting or representing real property or an interest in real property.