Under Internal Revenue Code (IRC) section 1031, no gain or loss is recognized when companies sell business or investment property and acquire property that is like-kind. A transaction that is structured as a tax-deferred exchange is generally referred to as a "like-kind exchange" or an "LKE". Equipment dealers, car rental companies, and other organizations that routinely dispose of business assets can realize substantial benefits from an ongoing program of exchanges (referred to as an LKE Program).
Like-Kind Exchange: Additional Rules for Exchanges of Personal Property and for Exchanges of Multiple Properties
This document contained final regulations relating to exchanges of personal property and multiple properties under section 1031 of the Internal Revenue Code. The regulations affect persons who exchange personal property or multiple properties. The regulations are necessary to provide persons who exchange these properties with the guidance necessary to comply with the law.
The final regulations are effective for exchanges occurring on or after April 11, 1991.
Depreciable tangible personal property is exchanged for property of a "like-kind" under section 1031 if the property is exchanged for property of a like-kind or like class. Depreciable tangible personal property is of a like class to other depreciable tangible personal property if the exchanged properties are either within the same General Asset Class or within the same Product Class. The attached document contains both the General Asset Class (GAC) and the North American Industry Classification System (NAICS) codes that are pertinent to tax-deferred personal property exchanges.
This revenue procedure provides a safe harbor under which the Internal Revenue Service (the “Service”) will not challenge whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment for purposes of § 1031 of the Internal Revenue Code.
Since the promulgation of the final regulations under § 1.1031(k)-1, taxpayers have engaged in a wide variety of transactions, including “parking” transactions, to facilitate reverse like-kind exchanges. Parking transactions typically are designed to “park” the desired replacement property with an accommodation party until such time as the taxpayer arranges for the transfer of the relinquished property to the ultimate transferee in a simultaneous or deferred exchange. Once such a transfer is arranged, the taxpayer transfers the relinquished property to the accommodation party in exchange for the replacement property, and the accommodation party then transfers the relinquished property to the ultimate transferee.
Safe harbor rules are provided under section 1031 of the Code, which allows for deferral of gain realized on a like-kind exchange of property, with respect to programs involving ongoing exchanges of tangible personal property using a single intermediary (“LKE Programs”). For purposes of this revenue procedure, an "LKE Program" is an ongoing program involving multiple exchanges of 100 or more properties. Although LKE Programs may differ in various ways, an LKE Program must have all of the following characteristics:
The purpose of the Act is to reduce the impact of acid rain through a program of annual allocations of sulfur dioxide emission allowances ("allowances") to certain fossil-fuel-powered combustion devices ("units"), such as boilers, owned by electricity generating companies ("utilities"). The program will be administered by the Environmental Protection Agency (the "EPA") with enforcement beginning in 1995.
Additional Relief for Like-Kind Exchanges for Which Deadlines May Be Postponed Under §§ 7508 and 7508A of the Internal Revenue Code
This notice advises taxpayers that the Internal Revenue Service and Treasury Department will modify retroactively Rev. Proc. 2004-13, 2004-4 I.R.B. 335, to provide additional tax relief to taxpayers (transferors) involved in § 1031 like-kind exchange transactions affected by a Presidentially declared disaster, a terroristic or military action, service in a combat zone, or . . .