tax-free exchange

(redirected from Tax Free Exchange)
Also found in: Acronyms.

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 ?
The original purchase by Jipmar was part of a 1031 tax free exchange and we assisted them in the sale of one of their other properties as well.
In March 2002, the Internal Revenue Service ("IRS") issued Revenue Procedure 2002-22 ("Rev Proc"), which contained clear guidelines on how to obtain revenue rulings confirming that a particular TIC qualifies for a 1031 Tax Free Exchange. Owners of TICs can sell existing property investments without taxable gain.
Vera Thomas, Senior Managing Director of CCIRE, represented the seller, a private company based out of New Jersey and a New York based buyer, who purchased the property to complete a 1031 tax free exchange.
Low interest rates and tax free exchange scenarios have enabled investors to capitalize on a marketplace that was ripe for the taking.
The purchaser had an immediate need for a 1031 tax free exchange. The buyer's requirement mandated that the sale close by January 5, 2004, and Eastern and ownership were able to execute the sale just three days before deadline.