In 2008, a provision was passed that enacted a special Section 1031 rule for water rights stock. IRS regulations are further explained below.

As noted, a provision of the Heartland, Habitat, Harvest, and Horticulture Act of 2008 amends Sec. 1031 to permit the exchange of water rights in the form of mutual ditch, reservoir and irrigation company stock, applicable to exchanges after the date of enactment. This is an exception to the general rule that stock is not qualified property for like-kind exchange treatment, but its application is limited to stock representing a holding of water rights that is recognized as real property under state law. Effective for exchanges after May 22, 2008, and before 2018.