Like-Kind Exchange

A tax deferred exchange that allows for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset. This can include the exchange of one business for another or one real estate investment property for another property. An 8824 form must be filed with the IRS detailing the terms of the deal.

This is also known as a "1031 exchange".

There are several important considerations with this type of exchange to ensure that a tax liability is not created upon sale of the first asset:

1. The asset being sold must be an investment property and can't be a personal residence.
2. The asset being purchased with the proceeds must be similar to the asset being sold.
3. Te proceeds from the sale must be used to purchase the other asset within 180 days of the sale of the first asset, although you must identify the property or asset that you are purchasing in the like-kind exchange within 45 days of the sale.

There are some limitations on the amount of capital gain that is tax deferred, so ensure that you check the latest tax rules before proceeding with a like-kind exchange.


Investment dictionary. . 2012.

Look at other dictionaries:

  • like–kind exchange — n: an exchange of business or investment property of the same kind, class, or character and excluding securities that is made pursuant to section 1031 of the Internal Revenue Code and is thus exempt from taxation Merriam Webster’s Dictionary of… …   Law dictionary

  • like-kind exchange — n. An exchange of an item of property for another item of property of a similar type and value, usually nontaxable. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008. like kind exchange …   Law dictionary

  • Like-kind exchange — A like kind exchange is a United States tax deferred exchange that allows for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first asset. A like kind exchange can… …   Wikipedia

  • like-kind exchange — An exchange of property held for productive use in a trade or business or for investment (except inventory and stocks and bonds) for other investment or trade or business property. Unless cash is received, the exchange is nontaxable. I.R.C. No.… …   Black's law dictionary

  • like-kind property — See like kind exchange …   Black's law dictionary

  • like-kind property — Property that is similar to property being sold in a 1031 exchange. Property must be like kind to be eligible for an exchange, but that does not mean it need be similar. Properties must simply be of the same nature or character (meaning both are… …   Law dictionary

  • Like-Kind Property — Any two assets or properties that are considered to be the same type, making an exchange between them tax free. To qualify as like kind, two assets must be of the same type (e.g. two pieces of residential real estate), but do not have to be of… …   Investment dictionary

  • kind — n 1: a particular type, category, or class properties of like kind see also like kind exchange 2 a: an unconverted form a partition of property in kind; broadly: a form other than money forbid a bribe in cash or in kind …   Law dictionary

  • exchange — To barter; to swap. To part with, give or transfer for an equivalent. Kessler v. United States, C.C.A.Pa., 124 F.2d 152, 154. To transfer goods or services for something of equal value. Rosenberg v. State, 12 Md.App. 20, 276 A.2d 708, 711. Act of …   Black's law dictionary

  • kind — Class, grade, or sort. City of St. Louis v. James Braudis Coal Co., Mo.App., 137 S.W.2d 668, 670. Genus; generic class; description. See in kind like kind exchange sample …   Black's law dictionary

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