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Wanna Trade?

IRS goes a little bit easier on like-kind exchanges.

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This story appears in the February 2002 issue of Entrepreneur. Subscribe »

There's good news concerning reverse like-kind exchanges. With a like-kind exchange, you trade business property you own for other business property in the same asset class. The result: no taxable gain or loss because the IRS sees the transaction as a nontaxable like-kind exchange, in which the tax basis of the old property becomes the tax basis of the new property.

With a reverse like-kind exchange, you acquire the replacement property before selling what you plan to give up, which may ease, say, a change in plant location. "Such an exchange would be used if the business owner identified the new property before he or she was ready to sell the current property," says Mark Luscombe, principal federal tax analyst with CCH Inc., a tax and business law information provider in Riverwoods, Illinois.

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