You do NOT recapture "Passive Loss Carryover" in a Likekind exchanges – IRC §1031
Under IRC § 469(g), current and carryforward passive activity losses are fully deductible in the year of an entire disposition in a fully taxable transaction to an unrelated party.
A §1031 exchange is, by definition, a nonrecognition event, there is no income against which to deduct the loss.suspended loss cannot be taken in a tax-deferred transaction.
"Passive Loss Carryover" transfers to the new property that you bought in your exchange and will continue to accumulate with losses from the new property until you sell the new property and don’t do an exchange.
An exchange of the taxpayer’s interest where all gain or loss is not recognized does not trigger suspended losses, (such as transactions governed by IRC § 351, 721 or 1031).
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Passive-Activity-Loss-ATG-Chapter-5-...
