tax-free exchange

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 ?
IRC section 1031 permits the tax-free exchange of like-kind property.
According to Degennaro, the sale loomed as a Herculean task since the purchaser's main focal point was designed to complete a tax-free exchange.
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.
The provisions would allow both life insurance and annuity products to include riders for long-term-care coverage and would greatly expand the tax-free exchange of life, endowment and annuity contracts for long-term-care contracts.
The tax-free exchange loophole; how real estate investors can profit from the 1031 exchange.
However, the goal of clients who choose to not do a tax-free exchange is generally to pay tax at lower long-term capital gain rates, 15 percent maximum federal rate, rather than at ordinary income tax rates, 35 percent maximum federal rate.
2016 paired shares of Santa Anita in a tax-free exchange.
oil and natural gas fields through a tax-free exchange of shares of stock.
Under the terms of the agreement, Interactive would acquire all of the issued and outstanding capital stock of Nuvo in a tax-free exchange for approximately two-thirds of the outstanding common stock of Interactive on a post-closing basis.
1035(a)(3), an annuity owner can effect a tax-free exchange of annuity contracts.
can be accomplished as a tax-free exchange under IRC section 721.
1031(k)1(c)(5)(i), minor items of personal property do not have to be separately identified in a deferred tax-free exchange.