Exchange of Like-Kind Business/Investment Assets (tangible)
o Key Words to Remember:
Tangibles
Business Trade-Ins
Swapping Real Estate
o Except: 5 [PRISS]
P – Partnership Interests
R – Real Property in different countries
I – Inventory
S – Stock
S – Securities
o Timing Requirements
(A) 45 days => to give up the property
(B) Earlier of 180 days or due date of the TP’s ITR (including extensions) => to receive the property
o If FMV (Old) > AB, there is a realized gain
Realized G/L = FMV (Old) – AB (Old)
OR
Realized G/L = FMV (New) – AB (Old) + Boot Received – Boot Paid
Recognized Gain = The lower of Realized Gain OR Boot Received
Deferred G/L = Realized G/L – Recognized G/L
Basis (New) = AB (Old) + Recognized G – Boot Received + Boot Paid
OR
Basis (New) = FMV (New) + Deferred L – Deferred G
o For Non-Like-Kind Items
Basis = FMV (New) + Boot Received