The Like Kind Exchange is a provisional portion of the US Tax code that is used a lot by larger business. Simply put what it allows you to do is to take one business or asset and sell it and buy another or exchange it for another that is similar without having to pay the tax consequences or liability of the sale of the first business or asset.
The Like Kind Exchange is also known as an exchange, because 1031 is the number of the provision in the tax code that allows it. Money can also be postponed when there is the Like Kind exchange that follows a sale.
The basic idea behind the like kind exchange is that there was no financial gain if you simply change your business or assets to another of the same type or style and you are simply exchanging one for another, in essence.
A good example would be the case if you own a building, sell it, and buy another of the money from the sale.
There are a few things to remember. Any new asset that is being purchased or property being gotten has to be of a similar nature to that which was sold.
You have to turn around and buy the new assets or property within 180 days of the first sale of the property or assets to enjoy the Like Kind Exchange tax.
The term is quite flexible in the definition of the IRS tax code, and it said that to be considered the Like Kind Exchange and we quote the code here, where it said that "the nature of the character of the property and not to its grade or quality."
This is one big reason that the larger businesses take advantage of the Like Kind Exchange. It allows them a method of getting around paying certain amounts of tax by deferring it down the line creating sort of a programmable tax shelter of sorts where you can work more or less your own deal out.
While there are a lot more details, too many to cover here in such a small space, if you are in business you may want to consider asking your tax professional about the benefits afforded under the Like Kind Exchange provision and see if there is anything there that may be advantageous to you from a tax standpoint. - 16890
The Like Kind Exchange is also known as an exchange, because 1031 is the number of the provision in the tax code that allows it. Money can also be postponed when there is the Like Kind exchange that follows a sale.
The basic idea behind the like kind exchange is that there was no financial gain if you simply change your business or assets to another of the same type or style and you are simply exchanging one for another, in essence.
A good example would be the case if you own a building, sell it, and buy another of the money from the sale.
There are a few things to remember. Any new asset that is being purchased or property being gotten has to be of a similar nature to that which was sold.
You have to turn around and buy the new assets or property within 180 days of the first sale of the property or assets to enjoy the Like Kind Exchange tax.
The term is quite flexible in the definition of the IRS tax code, and it said that to be considered the Like Kind Exchange and we quote the code here, where it said that "the nature of the character of the property and not to its grade or quality."
This is one big reason that the larger businesses take advantage of the Like Kind Exchange. It allows them a method of getting around paying certain amounts of tax by deferring it down the line creating sort of a programmable tax shelter of sorts where you can work more or less your own deal out.
While there are a lot more details, too many to cover here in such a small space, if you are in business you may want to consider asking your tax professional about the benefits afforded under the Like Kind Exchange provision and see if there is anything there that may be advantageous to you from a tax standpoint. - 16890
About the Author:
Anne Durrel comes from Stockton, California. She has written a number of articles on IRS . Please also check out her other guide on irs publications tips, and irs tax tables guide!
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