result

WHY YOU MAY NOT LIKE SO-CALLED "LIKE KIND EXCHANGES"

 

George Wilson Adams CPA MBA January 11, 2020

 

Like Kind Exchanges 960x720

 

What Is a Like Kind Exchange?

IRC Section 1031 allows taxpayers to exchange like-kind business and investment real estate tax free. Under the new tax law that took effect on January 1, 2018 personal property and intangible assets no longer qualify for a tax free like kind exchange. Generally only real estate used for business or investment purposes qualifies. Real estate held as inventory by a dealer does not qualify for a like kind exchange. Real estate in one state traded for real estate in a different state is generally considered like-kind. U.S. real estate traded for foreign real estate is not like kind.

 

 

Tax-Free Business Vehicle Trade-Ins Are Gone

Under the new tax law any trade in of an old business vehicle for a new business vehicle is potentially taxable. Through December 31, 2017 business owners could trade a used vehicle for a new vehicle and any gain would be deferred and rolled into the cost basis (used for depreciation) of the new vehicle. Business owners considering trading in their vehicles should determine the amount of any taxable gain and prepare to owe taxes.

 

 

Like Kind Exchanges Are Actually NOT "Tax-Free"

One common misconception about like kind exchanges is that they are tax-free. This is false. What actually happens is that any gain that would otherwise be taxable is simply deferred and reduces the cost basis of new, replacement property.

 

Here is a frequently used calculator to determine gain from a like kind exchange:

 

https://www.cchwebsites.com/content/calculators/LikeKindExchange.html

 

 

Timing Requirements

Many people trying to do a like kind exchange will give up the property they don't want to a Qualified Intermediary. They then have 45 days to identify replacement property and 180 days to actually receive (take title) to replacement property. Such a transaction is called a deferred exchange or "Starker" exchange after the court case that permitted it. This is a high-stakes, very stressful transaction where a taxpayer usually struggles to find satisfactory replacement property.

 

An alternative transaction is called a "Reverse Starker" or parking exchange where a taxpayer acquires replacement property in advance and parks it with a Qualified Intermediary. This intermediary also holds the property to be given up. The taxpayer has 180 days to dispose of the property he wants to give up to a third party- another stressful, high-stakes transaction.

 

These strict timing rules make it difficult to accomplish a like kind exchange. Real estate markets are in constant flux and it is difficult to cross-coordinate the actions of multiple people.

 

 

Debt Relief is Taxable

Any net debt relief received in a like kind exchange may be taxable, up to the amount of any gain pertaining to the property being given up. So if you are giving up a property with a $100,000 mortgage on it and will receive new, replacement property with a $60,000 mortgage on it then you have net debt relief of $40,000. Some or all of this debt relief may be taxable.

 

The only way to have a completely non-taxable like kind exchange is if your debt increased or the amount of debt on the old and the new properties just happens to be exactly the same.

 

Also, any cash you receive from the exchange is per se taxable.

 

 

Beware of Tricky Rules

In addition to the restrictions discussed above further special rules apply to like kind transactions with related parties, and exchanges of vacation homes, leasehold property with at least a 30 year term, and multi-asset exchanges.

 

For further information on like kind exchanges see IRS Publication 544 and IRS Form 8824.

 

 

LEGAL DISCLAIMER

George Adams
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339

©2015 Copyright George Adams CPA MBA. All Rights Reserved.

Business Cases:

Nucor Steel: Into the Storm

10-25-2011 Hits:7375 Company Analysis George Adams

Nucor Steel: Into the Storm

One of the largest steel companies in the U.S.had a forty year track record of unbroken profitability until 2009. How can Nucor succeed in a tougher, harsher climate?

Read more

RITZ-CARLTON (Circa 2008)

12-14-2011 Hits:7687 Company Analysis George Adams

RITZ-CARLTON (Circa 2008)

 The business strategy of luxury with a human face requires both popularity and exclusivity. How can Ritz-Carlton master this apparent contradiction?

Read more

SAS Company Analysis (Circa 1995)

12-13-2011 Hits:6870 Company Analysis George Adams

SAS Company Analysis (Circa 1995)

Does it pay to fly dirty?

Read more

Otis Elevator (Circa 2004)

12-13-2011 Hits:9108 Company Analysis George Adams

Otis Elevator (Circa 2004)

The largest elevator company in the world has to make some tough choices.

Read more

Vertex Company Analysis (Circa 2003)

12-27-2011 Hits:6443 Company Analysis George Adams

Vertex Company Analysis (Circa 2003)

Crucial business decisions can benefit from the insights of combinatoric analysis.

Read more

Walmart Company Analysis (Circa 2003)

12-27-2011 Hits:6195 Company Analysis George Adams

Walmart Company Analysis (Circa 2003)

The largest retailer in the world is getting too big to grow any further without new and better thinking.

Read more

Sara Lee Corporation (Circa 2008)

12-27-2011 Hits:6468 Company Analysis George Adams

Sara Lee Corporation (Circa 2008)

Nobody doesn’t like Sara Lee, until the company started hating itself.

Read more

Southwest Airlines (Circa 2010)

12-27-2011 Hits:6915 Company Analysis George Adams

Southwest Airlines (Circa 2010)

How can the most successful U.S. airline keep it up?

Read more

The Power to Save the World: Fusion, the Unknown Ideal

12-28-2012 Hits:7612 Company Analysis George Adams

The Power to Save the World: Fusion, the Unknown Ideal

Energy is the ultimate question of our time: how do we get it, at what cost and what consequences?

Read more

Business Issues:

Prev Next Page:

NO SWEAT NO CHECK

06-27-2024 Hits:949 Business Issue Analysis George Adams

NO SWEAT NO CHECK

We live in a corrupt era of history when more and more self-entitled people think they can sit around all day, eat chips, play video games, not work at all, and get paid big money.

Read more

BUYING OR SELLING A BUSINESS?

04-30-2024 Hits:1091 Business Issue Analysis George Adams

BUYING OR SELLING A BUSINESS?

In these tumultuous times more and more people are buying and selling businesses. This phenomenon runs parallel to the recent buzzing market in residential real estate sales.

Read more

TAX TIME 2024

02-06-2023 Hits:1810 Business Issue Analysis George Adams

TAX TIME 2024

Tax Time 2024 is upon us and officially began on January 29, 2024. For Maine residents personal returns for 2023 will be due on Wednesday, April 17, 2024. Business tax returns for corporations, multimember LLC's, and partnerships will be due...

Read more

Business Tax Organizer

01-04-2023 Hits:2192 Business Issue Analysis George Adams

Not everyone needs QuickBooks to keep track of business revenue and expenses. Smaller business owners can get by perfectly fine with a paper-based record-keeping system.

Read more

DRESS FOR SUCCESS

02-07-2023 Hits:2491 Business Issue Analysis George Adams

DRESS FOR SUCCESS

During the Covid pandemic many office employees started working from home in their pajamas. There was less need to shave, dress in appropriate business attire, fix your hair, and comply with generally recognized sartorial standards. That era is coming...

Read more

IRS ADJUSTS PAYROLL WITHHOLDING TABLES BECAUSE OF RAMPANT INFLATION

10-31-2022 Hits:2544 Business Issue Analysis George Adams

IRS ADJUSTS PAYROLL WITHHOLDING TABLES BECAUSE OF RAMPANT INFLATION

We Now Have the Highest Inflation in 40 Years. Almost everyone knows our economy is suffering from historic levels of inflation. Food and gas especially have gone up significantly in price.

Read more

FEAR OF ROUNDING

09-06-2022 Hits:2838 Business Issue Analysis George Adams

FEAR OF ROUNDING

Fear takes many forms and there are literally thousands of phobias out there. Mental health professionals assign various technical names to these very real phobias, such as 'agoraphobia' for people who are afraid of open spaces, 'hydrophobia' for those...

Read more

HOME EQUITY THEFT

07-29-2022 Hits:3279 Business Issue Analysis George Adams

HOME EQUITY THEFT

What happens if you don't pay your property taxes? What if adverse, even tragic, personal circumstances make it impossible for a home owner to pay property taxes due?

Read more

TAX VERSUS RISK

05-30-2022 Hits:3154 Business Issue Analysis George Adams

TAX VERSUS RISK

Everyone knows that tax returns are all about taxes and people focus on the all important number: Tax. But this is a simplistic perspective that is only half true.

Read more

CAN THE GOVERNMENT SEIZE YOUR MONEY?

02-26-2022 Hits:3697 Business Issue Analysis George Adams

In February, 2022 the far-left Prime Minister of Canada, Justin Trudeau, declared a state of emergency and invoked powers normally reserved for war time conditions.

Read more

Key Income Tax Rules and Opportunities for Landlords

01-12-2022 Hits:5268 Business Issue Analysis George Adams

Key Income Tax Rules and Opportunities for Landlords

Here are five key insights for residential and commercial landlords.

Read more

Where's the Money?

01-10-2022 Hits:5196 Business Issue Analysis George Adams

Where's the Money?

Your business checking account is overdrawn. Payroll is due tomorrow. You feel flat, busted broke. But your accountant tells you that your business made a profit of $50,000 and you are going to owe thousands of dollars in taxes to...

Read more

The Check Is In the Mail: What to do When Customers Don't Pay

01-07-2022 Hits:4891 Business Issue Analysis George Adams

The Check Is In the Mail: What to do When Customers Don't Pay

Are your customers pretending your business is a bank that gives free loans? Here's what you can do to deal with collection issues.

Read more

How to Stop Bullying by Banks

01-05-2022 Hits:3578 Business Issue Analysis George Adams

How to Stop Bullying by Banks

 Bankers routinely want copies of your tax returns to prove you can continue to pay on an existing loan. But what if your banker is worse to deal with than the IRS?

Read more

THINK OR DIE

12-15-2021 Hits:3504 Business Issue Analysis George Adams

THINK OR DIE

Here stands a besieged fortress of pure reason in a world gone mad. Here, a community of fifty brave scientists defies the very worst that Nature can do in order to seek knowledge and truth.

Read more

Personal Financial Planning Part III: True Wealth

12-31-2021 Hits:4950 Business Issue Analysis George Adams

Personal Financial Planning Part III: True Wealth

True wealth requires the absence of certain things as well as an abundance of dollars.

Read more

Personal Financial Planning Part II: Miserable Millionaires

12-29-2021 Hits:5130 Business Issue Analysis George Adams

Personal Financial Planning Part II: Miserable Millionaires

Mere money isn't enough: true stories of miserable millionaires.

Read more

Personal Financial Planning Part I: The Access Code to Success is 21100

12-27-2021 Hits:5267 Business Issue Analysis George Adams

Personal Financial Planning Part I: The Access Code to Success is 21100

How to get ahead during difficult times.

Read more

The Code Enforcement Gestapo

12-24-2021 Hits:4997 Business Issue Analysis George Adams

The Code Enforcement Gestapo

What if law and reason conflict?

Read more

Small Business Beware: The Maine Dept. of Labor is Coming After You

12-22-2021 Hits:4811 Business Issue Analysis George Adams

Small Business Beware: The Maine Dept. of Labor is Coming After You

Are you at risk of a Maine unemployment tax audit? This article discusses risk factors and what you can do to prevent an audit in the first place

Read more

Seller's Remorse

12-20-2021 Hits:5101 Business Issue Analysis George Adams

Seller's Remorse

 Thinking about selling your business? You have one chance to get this transaction right. Here are some important things to consider before you sell.

Read more

The Five Equations Every Business Owner Must Know

12-17-2021 Hits:5051 Business Issue Analysis George Adams

The Five Equations Every Business Owner Must Know

Don’t let the title fool you. Here is a very non-mathematical and easy- to-read article which has five key insights on how to make your business win in the real world.

Read more

CAN YOU DEDUCT YOUR DOG

12-06-2021 Hits:3534 Business Issue Analysis George Adams

CAN YOU DEDUCT YOUR DOG

This is a question I am asked over and over again by many clients. So here in this article I'm finally going to provide a comprehensive answer that addresses various circumstances. Federal income tax law is ridiculously complex and the...

Read more

CHAOS IN D.C.

04-19-2021 Hits:4562 Business Issue Analysis George Adams

CHAOS IN D.C.

Tax Season 2021 is the worst in decades because of the many, many retroactive tax law changes spewing from D.C. This article will summarize key changes, which may force many taxpayers who already filed their taxes in February or early...

Read more

THE SOCIETY OF FRIENDLY NUMBERS

04-06-2021 Hits:3989 Business Issue Analysis George Adams

THE SOCIETY OF FRIENDLY NUMBERS

Once upon a time there was a Society of Friendly Numbers, a Maine non-profit organization that truly believed that unfriendly numbers were the primary source of human misery and grief. Members of the Society were certain that language creates...

Read more

PANDEMIC PANDEMONIUM

05-21-2020 Hits:5542 Business Issue Analysis George Adams

PANDEMIC PANDEMONIUM

During the current Coronavirus global pandemic societies everywhere are confronting a stark choice between minimizing the harm caused by the virus and minimizing the harm caused by lockdowns and stay-at-home orders.

Read more

KEY INSIGHTS AND RECOMMENDATIONS FOR HOMEOWNER ASSOCIATIONS

11-25-2019 Hits:6183 Business Issue Analysis George Adams

KEY INSIGHTS AND RECOMMENDATIONS FOR HOMEOWNER ASSOCIATIONS

Most homeowner associations hold their annual meetings in December. This article is intended to offer constructive suggestions and general advice.

Read more

IF YOU CAN'T TRUST A PROFESSIONAL YOU CAN'T BE A CLIENT

01-13-2020 Hits:5556 Business Issue Analysis George Adams

IF YOU CAN'T TRUST A PROFESSIONAL YOU CAN'T BE A CLIENT

Trust is the universal foundation of all enduring relationships, including the business relationships clients have with professionals in all industries.

Read more

WHEN SHOULD YOU CLAIM SOCIAL SECURITY BENEFITS?

01-13-2020 Hits:5190 Business Issue Analysis George Adams

WHEN SHOULD YOU CLAIM SOCIAL SECURITY BENEFITS?

One of the most important considerations for maximizing social security benefits is to make a wise choice on when to start claiming.

Read more

FAILURE TO FILE TAX RETURNS

01-13-2020 Hits:5372 Business Issue Analysis George Adams

FAILURE TO FILE TAX RETURNS

In my career I've helped many people who have fallen behind in filing tax returns. Failure to file can occur for many reasons, including personal tragedies, divorce, medical issues, etc.

Read more

LIKE KIND EXCHANGES

01-13-2020 Hits:5391 Business Issue Analysis George Adams

LIKE KIND EXCHANGES

IRC Section 1031 allows taxpayers to exchange like-kind business and investment real estate tax free. Under the new tax law that took effect on January 1, 2018 personal property and intangible assets no longer qualify for a tax free like...

Read more

WHAT RECORDS SHOULD YOU GIVE YOUR ACCOUNTANT?

01-12-2017 Hits:8842 Business Issue Analysis George Adams

WHAT RECORDS SHOULD YOU GIVE YOUR ACCOUNTANT?

For many people it's not obvious what records and information their accountant needs. This article will discuss the most important information your accountant must know when it's time to do your taxes.

Read more

A MASSIVE TIDAL WAVE OF HIGHER LABOR COSTS IS COMING TO MAINE

02-21-2019 Hits:6502 Business Issue Analysis George Adams

A MASSIVE TIDAL WAVE OF HIGHER LABOR COSTS IS COMING TO MAINE

One of my duties as an accountant is to warn people and small business owners of major economic changes. In 2016 a public referendum to increase Maine's minimum wage passed by a slim majority.

Read more

THE NEW QUALIFIED BUSINESS INCOME DEDUCTION FOR LANDLORDS

02-27-2019 Hits:6589 Business Issue Analysis George Adams

THE NEW QUALIFIED BUSINESS INCOME DEDUCTION FOR LANDLORDS

The Kings of Keys have a new tax deduction starting in 2018

Read more

SELLER FINANCING: WHAT YOU NEED TO KNOW

08-09-2018 Hits:6725 Business Issue Analysis George Adams

SELLER FINANCING: WHAT YOU NEED TO KNOW

Trying to sell or buy a business or commercial real estate? If you are the biggest obstacle you will encounter is financing.

Read more

WHY THINGS GO WRONG

06-23-2018 Hits:6976 Business Issue Analysis George Adams

WHY THINGS GO WRONG

 The supreme Enemy of Mankind is an equation.

Read more

WATCH YOUR MAIL

06-15-2018 Hits:6451 Business Issue Analysis George Adams

WATCH YOUR MAIL

It is an unfortunate fact that many people and businesses treat administrative tasks like opening up mail as a nuisance. When people get busy with substantive work and the distracting events of life these seeming nuisance tasks get neglected, leading...

Read more

MEASURING EMPLOYEE WORTH

05-30-2018 Hits:8250 Business Issue Analysis George Adams

MEASURING EMPLOYEE WORTH

The job market today is tough and highly competitive. The first concern of many employees is to just hold onto their job. Labor force mobility (workers quitting one job to begin another) is at an all-time low. But all workers...

Read more

SMART MID-YEAR TAX MOVES

05-30-2018 Hits:6905 Business Issue Analysis George Adams

SMART MID-YEAR TAX MOVES

Mid-year and mid-summer arrive on schedule every June 30th or so. Here are some smart tax moves you should consider in order to avoid a nasty 'April surprise' next year:

Read more

PLANNING FOR THE UNEXPECTED

05-30-2018 Hits:6592 Business Issue Analysis George Adams

PLANNING FOR THE UNEXPECTED

Anyone who owns anything of value needs three things to document their intentions and protect their interests. These three critical documents are a will, a durable power of attorney and a living trust.

Read more

MAINE OPPORTUNITY CREDIT

05-30-2018 Hits:7844 Business Issue Analysis George Adams

MAINE OPPORTUNITY CREDIT

One of the most generous and most overlooked Maine income tax credits is the so-called Credit for Educational Opportunity. In my experience few accountants and even fewer clients are aware of its existence. The credit is intended to reward college-educated...

Read more

UNUSUAL TAX RULES

05-30-2018 Hits:6665 Business Issue Analysis George Adams

UNUSUAL TAX RULES

The tax law is a strange hybrid containing many obscure rules, exceptions to the exceptions, and deeply counter-intuitive definitions. Buried in the clutter of what Congress created is opportunity. Finding useful opportunities in the tax law is like digging through...

Read more

THE NEW TAX LAW

12-31-2017 Hits:13092 Business Issue Analysis George Adams

The 2017 Tax Cuts and Jobs Act was signed into law on December 22, 2017 and represents the most significant change in tax law since 1987.

Read more

HOW TRUMP DID IT

11-09-2016 Hits:8573 Business Issue Analysis George Adams

HOW TRUMP DID IT

This article is strictly non-political and explains how the billionaire Donald Trump legally avoided income taxes for many years.

Read more

BEWARE OF DARK CARS

01-12-2017 Hits:8172 Business Issue Analysis George Adams

BEWARE OF DARK CARS

One phenomenon that began in the last few years in Central Maine is dark cars

Read more

YEAR END TAX PLANNING

11-29-2015 Hits:9227 Business Issue Analysis George Adams

YEAR END TAX PLANNING

Once more it’s time to play another deep game of chess with the IRS. Are you ready? The clock is ticking....

Read more

Why Are You Using An LLC?

05-20-2012 Hits:16895 Business Issue Analysis George Adams

Why Are You Using An LLC?

It can cost you a fortune if you choose the wrong entity for your business.

Read more

Secret Unions: Employee Collusion and Conspiracy

10-25-2011 Hits:15321 Business Issue Analysis George Adams

Secret Unions: Employee Collusion and Conspiracy

Anyone can use Game Theory to try to get ahead. But sometimes there is a better, simpler strategy.

Read more

Jump! Employee Performance On Trial

10-31-2011 Hits:14701 Business Issue Analysis George Adams

Jump! Employee Performance On Trial

The true and the obvious frequently differ, especially when it comes to assessing employee performance.

Read more

You Have to Break Eggs to Make an Omelet

11-30-2011 Hits:13625 Business Issue Analysis George Adams

You Have to Break Eggs to Make an Omelet

Some employees take their work seriously while others don’t.

Read more

The Fallacy of Teamwork Part I: Train of Thought

11-30-2011 Hits:16296 Business Issue Analysis George Adams

The Fallacy of Teamwork Part I: Train of Thought

Is teamwork the answer to every business problem?

Read more

The Fallacy of Teamwork Part II: Michael Jordan Doesn’t Need a Memo

11-30-2011 Hits:16897 Business Issue Analysis George Adams

The Fallacy of Teamwork Part II: Michael Jordan Doesn’t Need a Memo

What does neuroscience have to say about the applicability of the team sports model to business collaboration?

Read more

On the Relative Importance of Sales People and Technical People to Business

11-30-2011 Hits:14470 Business Issue Analysis George Adams

On the Relative Importance of Sales People and Technical People to Business

Is it really true that technical employees are just a bunch of nerds a company puts up with so its star sales people can make big profits?

Read more

Business Cannot Ignore Its Environment

11-30-2011 Hits:15574 Business Issue Analysis George Adams

Business Cannot Ignore Its Environment

The power of goodwill to destroy the most successful companies.

Read more

Artificial Intelligence

11-30-2011 Hits:18225 Business Issue Analysis George Adams

Artificial Intelligence

There is nothing new under the sun, until computers become smarter than the smartest person.

Read more

The Growing Spectacle of Job Lotteries

11-30-2011 Hits:14629 Business Issue Analysis George Adams

The Growing Spectacle of Job Lotteries

A new take on the growing commodification of labor.

Read more

Understanding Tax Clients

06-05-2012 Hits:10578 Business Issue Analysis George Adams

Understanding Tax Clients

The primary cliché of our profession of taxes and accounting is that every client is different.

Read more

Making Business Succeed, Part One: Winning at Retail

06-26-2013 Hits:11029 Business Issue Analysis George Adams

Making Business Succeed, Part One: Winning at Retail

What you don't know may put you out of business.

Read more

Making Business Succeed, Part Two: Fresh Thinking For Farmers

07-23-2013 Hits:10247 Business Issue Analysis George Adams

Making Business Succeed, Part Two: Fresh Thinking For Farmers

There are many reasons for having faith in a seed.

Read more

Making Business Succeed, Part Three: Succeeding with Services

09-05-2013 Hits:17154 Business Issue Analysis George Adams

Making Business Succeed, Part Three: Succeeding with Services

Your journey to success will have many twists and turns. Here are important insights to guide you to success with your service business.

Read more

 

Contact Me

Member

Telephone: (207) 989-2700
Email - georgeadams@intelligenceforrent.com
Address: 450 South Main Street: The HQ of IQ
               Brewer Maine 04412-2339

Maine Society of Certified Public Accountants
Certified QuickBooks Professional Advisor
Bangor Region Chamber of Commerce
Beta Gamma Sigma and Phi Kappa Phi
National Association of Independent Writers and Editors
New England Peer Review

 

© 2024 Copyright George Adams CPA MBA. All Rights Reserved.
George Adams - More Than Just a CPASM

Real time web analytics, Heat map tracking