Library items related to like-kind exchange programs.

Understanding the Impact of Depreciation on Like-Kind Exchanges | FEA

"Like-kind exchanges under IRC §1031 support investment in commercial and residential real estate and encourage preservation of family-owned farms, ranches, and forestland.  Like-kind exchanges provide deferral, not elimination, of tax.  By preserving cash flow, section 1031 encourages taxpayers to divest properties that are under-utilized, inefficient, or that simply do not meet current needs, with replacement properties that will permit businesses to grow and thrive."

Tax Deferred Exchanges

It happens all the time. A call comes in from a knowledgeable accountant: “We have a client who is replacing equipment and wants to defer paying taxes. We need some help with an IRC section 1031 exchange.” What’s being referred to here is a tax deferred exchange, which essentially gives taxpayers the right to transfer value from one business or investment property to another one of “like kind” without paying taxes on any gain in the process.

Rev. Proc. 2003-39: Like-Kind Exchange Programs

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 (“ These types of exchanges are available to taxpayers who have an ongoing program of 100 or more properties. This allows for efficiencies that are not present in normal single asset exchanges such as providing blanket assignments of contract rights to the qualified intermediary and only needing a single Master Exchange Agreement rather than one for each periodic trade. The guidance for this type of exchange can be found in Rev. Proc. 2009-39 and is used frequently by leasing companies and users of heavy duty machinery and equipment. LKE Programs ”). For purposes of this revenue procedure, an "LKE Program" is an ongoing program involving multiple exchanges of 100 or more properties. Although These types of exchanges are available to taxpayers who have an ongoing program of 100 or more properties. This allows for efficiencies that are not present in normal single asset exchanges such as providing blanket assignments of contract rights to the qualified intermediary and only needing a single Master Exchange Agreement rather than one for each periodic trade. The guidance for this type of exchange can be found in Rev. Proc. 2009-39 and is used frequently by leasing companies and users of heavy duty machinery and equipment. LKE Programs may differ in various ways, an LKE Program must have all of the following characteristics:

Like-Kind Classification Codes

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 ("NAICS" )The standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. NAICS was developed under the auspices of the Office of Management and Budget, and adopted in 1997 to replace the Standard Industrial Classification (SIC) system. It was developed jointly by the U.S. Economic Classification Policy Committee (ECPC), Statistics Canada, and Mexico's Instituto Nacional de Estadistica y Geografia , to allow for a high level of comparability in business statistics among the North American countries. The NAICS Manual uses a 6-digit product classification system to describe depreciable tangible personal property. For LKE purposes, property within a product class are considered to be like-kind. Copies of the NAICS Manual may be obtained from the National Technical Information Service, an agency of the U.S. Department of Commerce, and may be accessed on the internet. View complete NAICS Codes online: http://www.census.gov/epcd/www/naics.html North American Industry Classification System (NAICS) codes that are pertinent to tax-deferred personal property exchanges.