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 ?
1031(a), no gain or loss is recognized when property held for use in a trade or business or held for investment is exchanged solely for like-kind property to be held either for use in a trade or business or for investment.
To qualify, she must either directly trade the property for a different but like-kind property or sell it through an exchange facilitator; see Regs.
1031 like-kind property requirement, when personal property comprises part of the relinquished or replacement property, like-kind or -class personal property should be included in the other property.
The Company also provides services in connection with tax-deferred exchanges of like-kind property and investment management services to individuals, companies, banks and trusts.
Gain recognized (lesser of line 1 or 2) $ -- Basis of property received (3): Adjusted basis of like-kind property surrendered $ -- Plus: FMV of boot given (if any) $ -- Plus: Gain recognized, if any (from above) $ -- Less: FMV of boot received (if any) $ -- Basis of like-kind property received $ -- (1) Application of the like-kind exchange provisions is mandatory, rather than elective.
1031 (a)(1) provides that, generally, no gain or loss is recognized on an exchange of like-kind property.
1031(a)(1) provides that no gain or loss is recognized on an exchange of property held for productive use in a trade or business or for investment if the property is exchanged solely for like-kind property to be held either for productive use in a trade or business or for investment.
2002-83 provides that a like-kind exchange (LKE), preceded by a transfer of property to a qualified intermediary (QI), is not tax-free when a related party disposes of like-kind property for cash in the transaction.
1031(a) provides that no gain or loss is recognized on an exchange of property held for productive use in a trade or business or for investment, if the property is exchanged solely for like-kind property to be held for the same purpose.
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.
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.
From the most recent IRS published data, almost 250,000 exchanges are filed annually, with a total value approaching $74 billion ("Data for Like-Kind Property Exchanges, 1995-2013," http://bit.