A Like-Kind Exchange happens when the owner of real property which is used for business or investment property exchanges that property with the same type or "like-kind". When a like-kind exchange is made, the taxpayer is not required to recognize a gain or loss under Internal Revenue Code Section 1031.
If as part of the like-kind exchange there is an exchange of other property or money, the taxpayer is required to recognize the gain to the extent of the property or money received above the like-kind exchange. No loss may be recognized.
Please Note: According to the IRS, "Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange. A transition rule in the new law provides that Section 1031 applies to a qualifying exchange of personal or intangible property if the taxpayer disposed of the exchanged property on or before December 31, 2017, or received replacement property on or before that date. "
Where do I enter my Like-Kind Exchange?
Like-Kind exchanges are entered into the federal section of the return by following this path:
- Select Federal from the left side menu
- Select Income from the left side menu under the Federal heading
- Scroll down the list of income and select "Begin" under the "Less Common Income" section
- Scroll down the list and select "Begin" under the Like-Kind Exchanges - Form 8824