Definition of Like-kind exchange:
Exchange of similar business or investment assets on which any gain or loss is not recognized until the property received in exchange is sold or disposed of.
A like-kind exchange, sometimes styled as a like kind exchange, is a tax-deferred transaction that allows for the disposal of an asset and the acquisition of another similar asset without generating a capital gains tax liability from the sale of the first asset.
Until the passage of tax legislation in December 2017, that could have included the exchange of one business for another—or one piece of tangible property, such as artwork or heavy equipment, for another. After 2017, a like-kind exchange applies only to the exchange of a business or real estate investment property for another property.
How to use Like-kind exchange in a sentence?
- Savvy sellers can use the like-kind exchange to defer other specific types of gains, such as depreciation.
- A like-kind exchange is used when someone wants to sell an asset and acquire a similar one while avoiding the capital gains tax.
- Like-kind exchanges are heavily monitored by the IRS and require accurate bookkeeping to ensure no tax penalty is incurred.
Meaning of Like-kind exchange & Like-kind exchange Definition