By: Amanda Wilson
If you are considering a future like-kind exchange of real property, proceed with caution.
The tax code allows taxpayers to exchange property that they hold for investment or use in business for property of a like-kind without having to recognize the tax gain on the exchange. The gain is instead deferred until the taxpayers dispose of their replacement property. While like-kind exchanges are a popular tax planning tool, they have become the target of proposals aimed at raising tax revenues. Most recently, the Obama Administration has proposed limiting the amount of capital gain that can be deferred from a like-kind exchange of real property to $1 million per taxpayer per tax year. If this proposal is enacted into law, it is expected to apply to like-kind exchanges completed after December 31, 2014. So, if a like-kind exchange of real property is on the horizon for you, be wary and consider acting sooner rather than later.