With the use of like-kind--or "1031"--exchanges surging,
the IRS is stepping up scrutiny and will research reporting and
compliance issues involving the tax strategy.
This popular tax strategy used by real-estate investors generally
allow participants to defer, or sometimes even avoid, capital-gains
taxes when they sell a business or investment property and replace it
with a similar asset within a specified period.
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A report issued by the Treasury Inspector General for Tax
Administration urges the IRS to do a better job of explaining the rules
surrounding like-kind exchanges to taxpayers, and says clearer guidance
will help deter unscrupulous promoters from trying to abuse the system.
In response to the report, the IRS will be revising form
instructions, publications and other communications, as well as conduct
a research study of reporting and compliance issues involving like-kind
exchanges.
Read the report at
www.treas.gov/tigta/auditreports/2007reports/200730172fr.html.
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