Like-Kind Property

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 ?
Presuming all other 1031 requirements are met, you should be able to exchange your three properties for a single, like-kind property.
Any non like-kind property received by the taxpayer, referred to as "boot", results in gain recognition on the boot received.
into rent territory is the fact the cost of ownership is outpacing the cost of renting a like-kind property, saidEli Beracha, Ph.D., co-creator of the index and director of theHollo School of Real Estate at FIU.
The Company also provides services in connection with tax-deferred exchanges of like-kind property as well as investment management services to individuals, companies, banks and trusts.
Like-kind exchange treatment The ability to defer gain from an exchange of like-kind property is now restricted to realty; exchanges of tangible personal property no longer qualify (IRC section 1031).
Taxpayers holding investments, whether in the form of securities, real estate, collectibles or other assets, often have an opportunity to reduce their overall tax bill by some strategic buying and selling toward the end of the year, as well as exchanging appreciated assets for like-kind property in order to defer gains.
The key requirement is that the replacement property into which the money is invested be "like-kind." However, for real estate, the definition of like-kind property is broad: any domestic real estate that is held for productive use in a trade or business or held for investment purposes can be exchanged for any other property.
Section 1031 lets investors defer capital-gains tax on the sale of the property if they reinvest the proceeds from that sale in like-kind property.
In the business of issuing and underwriting title insurance policies, the company also provides services related to tax-deferred exchanges of like-kind property and investment management as well.
The tax basis is decreased by any money or any non-like-kind properties received in addition to like-kind property. If property previously exchanged via [section]1031 is sold in a taxable transaction, the taxable gain is calculated using the calculated carryover tax basis that is calculated upon the previous [section]1031 transaction (adjusted for any depreciation or other adjustments to basis).
For taxable years beginning on or after Jan.1, 2014, California requires taxpayers who exchange real or tangible personal property located in California for like-kind property located outside of California, and that meet all of the requirements of IRC Sec.
1031 provides that no gain or loss is recognized if property used in a trade or business or held for investment is exchanged for like-kind property.(1) The law excludes exchanges of inventory, stocks, bonds, interests in partnerships, and chases in action from nonrecognition treatment.(2) The property that the taxpayer transfers is usually referred to as relinquished property, and the property received is referred to as replacement property Deferred transactions may qualify as like-kind exchanges if they are completed by the earlier of the due date of the tax return for the tax year in which the transfer of the relinquished property occurs or 180 days after such transfer.(3)