Section 1031 Like-Kind Exchanges
Section 1031(a) of the Internal Revenue Code (26 U.S.C. § 1031) dictates the recognition rules for realized gains (or losses) that emerge as a result of an exchange of like-kind property kept for engaging use in investment, business or trade. It asserts that none of the realized gain or loss will be recognized at the time of the exchange. It also affirms that the property to be exchanged must be identified within 45 days and received within 180 days.
1031(b) states when like-kind property and boot can be accepted. The gain is recognized to the extent of boot received.
1031(c) comprises cases similar to those in 1031(b), besides when the transaction ends in a loss. The loss is not considered at the time of the operation but needs to be carried forward in the manner of a higher basis on the property acquired.
1031(d) defines the basic calculation for property acquired during a like-kind exchange. It declares that the basis of the new property is similar to the basis of the property given up, deducting any money taken by the taxpayer, plus any gain (or minus any loss) recognized on the transaction. If the trade falls under 1031(b) or (c), the basis shall be allotted between the properties received (other than money), and for purposes of allocation, there shall be assigned to such other property, an amount similar to its Fair Market Value at the date of the exchange.
1031(e) states that livestock of different sexes do not qualify for a like-kind exchange.
1031(h)(1) dictates that real property located outside the United States and real property within the United States are not to be considered like kind.
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