Like-Kind Property

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Like-Kind Property

Properties of the same type that are not necessarily the same property. Under U.S. tax law, two parties may exchange like-kind property without being subject to capital gains taxes. For example, if a person trades a rusty 1993 Chevrolet Cavalier for a mint-condition 1968 Chevrolet Corvette, he will not be liable for capital gains taxes on the extra value of the Corvette because both properties are automobiles. However, if he then trades the Corvette for 100 acres of farm land, he is liable for capital gains taxes because cars and real estate are not like-kind properties.
References in periodicals archive ?
One of the challenges with our market is that we are not selling like-kind properties.
Internal Revenue Code Section 1031 allows taxpayers to defer federal income taxes on an exchange of like-kind properties held for business or investment purposes.
For real estate, like-kind properties need not be of the same type or class, so long as each is used in a trade or business or held for investment.
Sometimes taxpayers exchange property that satisfies the requirements for both the exclusion of gain for a primary residence under IRC section 121 and the nonrecognition of gain on the exchange of like-kind properties under IRC section 1031.
First, comparable market sales of like-kind properties are used to establish value.
The IRS is quite liberal in its interpretation of like-kind properties and views almost all real estate as similar in nature or character.
The qualified intermediary safe harbor is now available to simultaneous transfers of like-kind properties, whereas the other safe harbors are not.
Additionally, this purchase should allow us to utilize a 1031 exchange and avoid built-in gains taxes on any sales of like-kind properties that may occur.
FNF 1031 provides intermediary services for property sellers who seek to defer their capital gains taxes by investing in new like-kind properties.
It created the opportunity for undivided fractional interest in real estate and more importantly qualified TICs as like-kind properties eligible for use in 1031 tax-deferred exchanges.
The definition of like-kind properties is different for financial accounting than for tax purposes.