The exchange of property for the same kind of property is the most common type of nontaxable exchange. To be a like-kind exchange, the property traded and the property received must be both a qualifying property and like-kind property. Additional requirements apply to exchanges in which the property received is not received immediately upon the transfer of the property given up. If the like-kind exchange involves the receipt of money or unlike property or the assumption of your liabilities, you may have to recognize gain.
You must report an exchange to the IRS on Form 8824 and file it with your tax return for the year in which the exchange occurred. If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions. Form 8824 asks for:
| • Descriptions of the properties exchanged | • Gain or loss on sale of other (non-like-kind) property given up |
| • Dates that properties were identified and transferred | • Cash received or paid; liabilities relieved or assumed |
| • Any relationship between the parties to the exchange | • Adjusted basis of like-kind property given up; realized gain |
| • Value of the like-kind and other property received |
NOTE: This is a guide on entering like-kind exchanges into the Keystone Tax Solutions program. This is not intended as tax advice.