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VOL 51; NEW LIMITATIONS ON LIKE KIND EXCHANGES

Posted by Admin Posted on Sept 12 2018

 

NEW LIMITATIONS ON LIKE KIND EXCHANGES


Written by: Michelle Chlebowski, CPA

The Tax Cuts and Jobs Act law enacted in December 2017 includes updated limitations on Like Kind Exchanges available to taxpayers. The previous rules allowing for the deferral of gain on like-kind exchanges of tangible personal property have been modified, in general removing the ability to defer these gains. The primary logic of the new limitations is due to the increased and expanded rules over expensing tangible personal property and certain building improvements.

Under the newly enacted law, no gain or loss is recognized on the exchange of real property if that property is either held for productive use in a trade or business or held for investment. These rules apply if the real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

Congress intended that real property eligible for like-kind exchange treatment under pre-Tax Cuts and Jobs Act law would continue to be eligible for like-kind exchange treatment. This can include certain partial interests in real property, remainder interests and life estates in real property, leaseholds of at least 30 years, perpetual water rights, coal and oil leases, royalty interests in oil, gas, and mineral rights, interests in certain trusts, and undivided fractional interests in real property.

It is important to note, the updated limitations on Like-Kind Exchanges do not apply if the property is disposed of by the taxpayer in an exchange prior to January 1, 2018 or received by the taxpayer in the exchange received before January 1, 2018. This means that if the first step in either a forward exchange or reverse exchange occurs before January 1, 2018 then the entire exchange can qualify as a tax-free like-kind exchange, assuming all other prior requirements under Code Sec. 1031 are satisfied.


 

 
IMPORTANT TAX DATES TO REMEMBER


We want to remind you of important tax due dates and deadlines that are just around the corner.

Here is a recap of important dates to keep in mind as 2018 progresses:
                                                      

  • June 15, 2018 - 2018 2nd quarter estimate payment
  • September 17, 2018 - 2018 3rd quarter estimate payment
  • September 17, 2018 - Form 1120-S and 1065, if extended
  • October 1, 2018 - Form 1041, if extended
  • October 15, 2018 - Form 1040 and 1120, if extended
  • January 15, 2019 - 2018 4th quarter estimate payment
     
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Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

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