How Do I Limit My Liability When I Sell Land?
Full Question:
Answer:
Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.
Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.
Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.
The answer will depend on al lthe circumstances involved. I am prohibited from giving legal advice. This service provides information of a general legal nature. I suggest you consult a local attorney who can review all the facts and documents involved.
For further discussion, please see:
http://www.irs.gov/publications/p544/index.html
http://www.irs.gov/pub/irs-pdf/f8824.pdf
http://www.irs.gov/businesses/small/industries/content/0,,id=98947,00.html
http://www.irs.gov/taxtopics/tc701.html
http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html
http://www.irs.gov/faqs/content/0,,id=199963,00.html