IRS Proposes Rule on Like-Kind Exchanges

Multifamily
Published

The Internal Revenue Service has released a draft regulation to define a like-kind property that is held for investment, trade or business purposes under Section 1031 of the tax code (governing like-kind exchanges). The IRS will accept comments through Aug. 11.

A like-kind exchange under U.S. tax law is a tax-deferred transaction that allows for the disposal of an asset and the acquisition of another similar asset without generating tax liability from the sale of the disposed asset.

Under the Tax Cuts and Jobs Act, Section 1031 was limited to real property. Existing statute and regulations do not define real property for purposes of Section 1031. Determination of real property is instead accomplished using definitions obtained elsewhere in the tax code.

In addition to defining real property, the regulation seeks to clarify how taxpayers should treat certain receipts of personal property that is incidental to the real property received.

NAHB will continue to analyze the proposed regulations and plans to submit comments after a careful review.

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