Question

15, Which is true of like-kind exchange treatment?

A. It applies only to real property

B.It applies only to business or Investment property.

C. Sole proprietor's income from business activity

C. Losses are never recognized.

D.Guaranteed payment to limited partner

Answer 1

B. It applies only to business or Investment property.

There are several important considerations to keep in mind with a like-kind exchange to ensure that a tax liability is not created upon the sale of the first asset:

1. The asset being sold must be an investment property and cannot be a personal residence.
2. The asset being purchased with the proceeds must be similar to the asset being sold.
3. The proceeds from the sale must be used to purchase the other asset within 180 days of the sale of the first asset, although you must identify the property or asset that you are purchasing in the like-kind exchange within 45 days of the sale.