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Nontaxable Exchanges (Excerpt)
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Certain exchanges of property are not taxable. This means that any gain from
the exchange is not taxed, and any loss cannot be deducted. Your gain or loss
will not be recognized until you sell or otherwise dispose of the property you
receive.
Like-Kind Exchanges:
The exchange of property for the same kind of property is the most common
type of nontaxable exchange. To be a like-kind exchange, the property traded and
the property received must be both of the following.
· Qualifying property, and
· Like property.
These two requirements are discussed in IRS Publication 554.
Additional requirements apply to exchanges in which the property received is
not received immediately upon the transfer of the property given up. See
Deferred Exchanges, in IRS Publication 554.
If the like-kind exchange involves the receipt of money or unlike property or
the assumption of your liabilities, you may have a taxable gain. See Partially
Nontaxable Exchanges, in IRS Publication 554.
Multiple-party transactions:
The like-kind exchange rules also apply to property exchanges that involve
three- and four-party transactions. Any part of these multiple-party
transactions can qualify as a like-kind exchange if it meets all of the
requirements described in IRS Publication 554.
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