In which scenario involving a 1031 exchange would income taxes typically NOT be owed?

In a 1031 exchange, also known as a like-kind exchange, income taxes are typically deferred on the exchange of properties that are held for productive use in a trade or business or for investment purposes. The key component here is that both properties involved in the exchange must qualify as "like-kind" under the regulations outlined in the Internal Revenue Code.

In the scenario where a fourplex is exchanged for a small farm of equal value, both properties qualify as investment properties and thus can be considered like-kind. As both the fourplex and the farm are being used for investment purposes, this exchange does not trigger immediate capital gains taxes, allowing the owner to defer taxes on any appreciation of the properties.

This contrasts with the other options presented, where the properties involved either do not align with the like-kind requirement or do not maintain a consistent investment-purpose status, thus likely leading to tax obligations in those situations. For example, exchanging a boat or a car does not satisfy the like-kind requirement because they are not real property and typically not held for investment in the same manner as real estate assets.