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What are the tax implications of a like-kind property exchange?

A like-kind exchange is a type of transaction that may allow for the taxpayer to defer taxable gains or avoid taxable gains altogether. The visual below illustrates the different aspects of like-kind exchanges to consider and how to calculate each aspect.

For example, Leo exchanged an asset used for business purposes for a very similar asset which will be used to replace his exchanged asset. The property that Leo relinquished had a fair value of $500,000 and a basis of $400,000 in exchange for property that has a fair value of $525,000 and a basis of $450,000. In addition, Leo gave cash of $25,000.


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