Question

1. What are the major tax differences between a casualty involuntary conversion and a condemnation conversion?

2. What type of property is eligible for like-kind exchange treatment?

3. If a taxpayer enters into a like-kind exchange is the provision elective or mandatory?

4. If a taxpayer makes an exchange of a vacant lot held for investment purposes, would the receipt of a duplex in the exchange be considered like-kind property?

5. What could cause a like-kind exchange to be at least a partially taxable event?

6. In a like-kind exchange, generally how is the basis of the like-kind property received determined?

7. Is there such a thing as a “delayed” exchange? If so what are the basic rules to qualify for the delayed reporting?

Answer 1

2. A like-kind property must be an investment/trade/ business property. Personal properties are not eligible for this. Both propertie must be used for the purposes of investment, business or trade.

Like-kind property does not include the following

• Inventory or stock in trade
• Stocks, bonds or other types of notes
• Securities, debt
• Partnership interests
• Trust certificates

Personal property used like a residence, or for any personal purposes, doesn't qualify for like-kind exchange treatment.

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