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Regulations Issued on 1031 Like-kind Exchanges

The Internal Revenue Service has issued final regulations regarding section 1031 like-kind exchanges. The define real property under section 1031 and also provide  a rule addressing the receipt of personal property that is incidental to real property received in a like-kind exchange.

The 2017 Tax Cuts and Jobs limited like-kind exchange treatment to exchanges of real property. A variety of exchanges of personal and  intangible property no longer qualify for nonrecognition of gain as like-kind exchanges as of Jan. 1, 2018. These include vehicles, artwork, collectibles, patents and other intellectual property. An exchange of real property held primarily for sale also does not qualify as a like-kind exchange.

Like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment. Real property includes land and generally anything permanently built on or attached to land. 

Real property also includes property that is characterized as real property under applicable state or local law. Intangible properties, such as leaseholds or easements, qualify as real property under section 1031.

Taxpayers must file e Form 8824, Like-Kind Exchanges to report such an exchange. This must be filed with the tax return for the year they transfer property under a like-kind exchange.  The form helps them figure out the amount of gain deferred and the basis of the property received. They can also calculate the gain they must report if r if cash or property that isn't of a like-kind is involved in the exchange.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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