Like-kind exchanges under section 1031 of the Internal Revenue Code permit a taxpayer to defer the recognition of gain associated with the disposition of property used in a trade or business or held for investment purposes, thereby deferring tax liability associated with the disposition of property. I.R.C. § 1031(a)(1). The rationale for the deferral of taxes is that the taxpayer’s economic position remains unchanged: She had funds invested in a particular type of property both before the exchange and afterwards. See Comm’r v. P.G. Lake, Inc., 356 U.S. 260, 268 (1958).
There are a variety of technical rules under section 1031: For example, inventory held for sale won’t qualify for like-kind treatment, and neither will securities, such as stocks or bonds.… Read More