Generally, an exchange of property is a taxable transaction, just like a sale. But the law includes an exception when investment or business property is traded for similar property. Any gain that would be triggered by the sale of such property is deferred in the case of a like-kind exchange. This break has applied to assets such as real estate and tangible personal property such as heavy equipment and art work.
Going forward, though, the new law restricts its use to like-kind exchanges of real estate, such as trading one rental property for another. It’s estimated that the change would cost affected taxpayers more than $30 billion over the next ten years.
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