Chapter 12 Property Transactions Nontaxable Exchanges
Chapter 12 Property Transactions: Nontaxable Exchanges
Learning objectives Understand the tax consequences arising from a like-kind exchange Determine the basis of property received in a like-kind exchange
Learning Objectives • Understand the tax consequences arising from a like-kind exchange • Determine the basis of property received in a like-kind exchange
Learning Objectives Determine whether gain from an involuntary conversion can be deferred Determine the basis of replacement property in an involuntary conversion Determine when a gain resulting from sale of principal residence may be excluded
Learning Objectives • Determine whether gain from an involuntary conversion can be deferred • Determine the basis of replacement property in an involuntary conversion • Determine when a gain resulting from sale of principal residence may be excluded
Like-kind Exchanges Like-kind Property Defined Refers to nature and quality Same class Personal property for personal property Real property for real property Certain properties do not qualify for like- kind exchange
Like-kind Exchanges Like-kind Property Defined • Refers to nature and quality • Same class – Personal property for personal property – Real property for real property • Certain properties do not qualify for likekind exchange
Like-kind Exchanges A Direct Exchange Must Occur Direct exchange not AUTO SHOWROOM a conversion into proceeds with a subsequent purchase Certain interdependent transactions may 目中 eceIve exchange treatment Three-party exchange
Like-kind Exchanges A Direct Exchange Must Occur • Direct exchange not a conversion into proceeds with a subsequent purchase • Certain interdependent transactions may receive exchange treatment • Three-party exchange
Like-kind Exchanges Three-party Exchanges Three parties may be involved in a simultaneous or non-simultaneous like-kind exchange Finding a suitable exchange property may be difficult
Like-kind Exchanges Three-party Exchanges • Three parties may be involved in a simultaneous or non-simultaneous like-kind exchange • Finding a suitable exchange property may be difficult
Like-kind Exchanges Receipt Of Boot Gain is recognized to extent of boot received, limited by realized gain Loss is never recognized Boot is any non qualifying property Mortgages are offset to determine if there is net boot
Like-kind Exchanges Receipt Of Boot • Gain is recognized to extent of boot received, limited by realized gain – Loss is never recognized • Boot is any nonqualifying property • Mortgages are offset to determine if there is net boot
Like-kind Exchanges Basis Of Property Received Basis of property given up less boot received plus gain recognized Basis of non qualifying property (boot)is the property's FMV
Like-kind Exchanges Basis Of Property Received • Basis of property given up less boot received plus gain recognized • Basis of nonqualifying property (boot) is the property’s FMV
Like-kind Exchanges Exchanges between related parties Transfer of non- like-kind property Holding period
Like-kind Exchanges • Exchanges between related parties • Transfer of nonlike-kind property • Holding period
Involuntary Conversions Involuntary Conversion Defined Includes theft, seizure requIsItion, condemnation or destruction of property Gains arise when Insurance or government proceeds exceed the propertys 个 FREEWAY adjusted basis Us 99 BUSINESS Severance damages
Involuntary Conversions Involuntary Conversion Defined • Includes theft, seizure, requisition, condemnation, or destruction of property • Gains arise when insurance or government proceeds exceed the property’s adjusted basis • Severance damages
