[Pennalynn Lott]

How do you handle cash received over and above the FMV of like-kind exchanges?

As in, I have undeveloped land valued at $500K. I exchange it for similar land in another county, also valued at $500K. But the person additionally gives me $100K in cash. I assume this isn’t a boot, because it’s not bringing up the value of the exchanged-for asset; the given-up asset and the exchanged-for asset are of equal FMV.

So what do I do with the extra $100K in cash?

Thanks,
Pennalynn

[leglock]

cash received is always boot

[Pennalynn Lott]

Thanks, leglock! So the cash is a taxable gain for the year I did the like-kind exchange, right? Where do I put that in something like TurboTax? Do I account for the cash somewhere else outside of the like-kind section (like Other Income, Sale of Real Estate)?

[vodrldnr]

Think about the definition of FMV. It is the highest amount you receive. In that sense, when you initially recognize the acquired asset, FMV should be 500+100 (Boot) received. Since the boot is received and Less than 25%, you have to recognize the gain form this nonmonetory transaction.(assuming No commercial substance). Yes gain is taxable income. It will be included in the income from continuing operation as other gain.

[Skynet]

Like-Kind exchanges is like a guy trading in one girlfriend for another because the new girlfriend is hotter and better looking.

In this case, rather than an inflow of cash, there would be an outflow of cash because the guy has to replace his belongings that the ex-girlfriend had tossed out the window.

[Author]

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