tax-free exchange

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Tax-Free Exchange

Under Section 1031 of the Internal Revenue Code, the exchange of two assets of like kind, even if of different quality, that are used for a business or for investment purposes. The goods exchanged are not assessed capital gains taxes. More precisely, capital gains taxes are deferred until an asset is resold with no intention of reinvestment. Tax-free exchanges also apply if one sells an asset with the intention to use the proceeds to buy a similar asset. For example, if a farmer sells his farm and uses the money to buy another farm, capital gains taxes are likely deferred on the money he made on the sale of the first farm. The same would be true if the he traded farm for farm.

tax-free exchange

An exchange of assets between taxpayers in which any gain or loss is not recognized in the period during which the exchange takes place. Rather, taxpayers are required to adjust the basis of assets exchanged.

tax-free exchange

A common term for a tax-deferred exchange. It is not tax free; one pays the taxes at a later date. See 1031 exchange.

References in periodicals archive ?
That is why so many professionals have been recommending 1031 tax-free exchanges to their clients.
The Company also provides services in connection with tax-free exchanges of like-kind property as well as investment management services to individuals, trusts, foundations and businesses.
This is one of the major disadvantages of tax-free exchanges of variable annuity contracts--the appearance of new surrender charges after the surrender period has expired on the old contract.
1035(a)(3), an annuity owner can effect a tax-free exchange of annuity contracts.
Cost-segregation and tax-free exchanges are still great strategies
TEI recognizes that the IRS is opposed to sanctioning tax-free exchanges of businesses.
1031 tax-free exchanges often rely on professional exchange companies--such as affiliates of escrow and title companies--to draft documents, advise on tax and legal issues and close the transaction.
Clients engaging in deferred tax-free exchanges must identify the replacement property within 45 days after closing the relinquished property sale.
Under the terms of the merger agreements, approximately 3 million shares were issued to the shareholders of the three acquired companies in tax-free exchanges.
The transactions are expected to be tax-free exchanges of capital stock and will be accounted for as poolings of interests.
This structure offers the company additional flexibility for tax-free exchanges, as if and when these sales are consummated.
2002-22 on whether an undivided fractional interest in real property is an interest in a separate tax entity ineligible for tax-free exchange under Sec.