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(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind which is to be
held either for productive use in a trade or business or for
investment.
(2) Exception
This subsection shall not apply to any exchange of—
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which has in
effect a valid election under section 761 (a) to be excluded from the
application of all of subchapter K shall be treated as an interest in
each of the assets of such partnership and not as an interest in a
partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged property
For purposes of this subsection, any property received by the taxpayer
shall be treated as property which is not like-kind property if—
(A) such property is not identified as property to be received in the
exchange on or before the day which is 45 days after the date on which
the taxpayer transfers the property relinquished in the exchange, or
(B) such property is received after the earlier of—
(i) the day which is 180 days after the date on which the taxpayer
transfers the property relinquished in the exchange, or
(ii) the due date (determined with regard to extension) for the
transferor’s return of the tax imposed by this chapter for the taxable
year in which the transfer of the relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain, but also of other property or money, then the
gain, if any, to the recipient shall be recognized, but in an amount
not in excess of the sum of such money and the fair market value of
such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a), of
section 1035(a), of section 1036(a), or of section 1037(a), if it were
not for the fact that the property received in exchange consists not
only of property permitted by such provisions to be received without
the recognition of gain or loss, but also of other property or money,
then no loss from the exchange shall be recognized.
(d) Basis
If property was acquired on an exchange described in this section,
section 1035 (a), section 1036(a), or section 1037 (a), then the basis
shall be the same as that of the property exchanged, decreased in the
amount of any money received by the taxpayer and increased in the
amount of gain or decreased in the amount of loss to the taxpayer that
was recognized on such exchange. If the property so acquired consisted
in part of the type of property permitted by this section, section 1035
(a), section 1036(a), or section 1037 (a), to be received without the
recognition of gain or loss, and in part of other property, the basis
provided in this subsection shall be allocated between the properties
(other than money) received, and for the purpose of the allocation
there shall be assigned to such other property an amount equivalent to
its fair market value at the date of the exchange. For purposes of this
section, section 1035 (a), and section 1036 (a), where as part of the
consideration to the taxpayer another party to the exchange assumed (as
determined under section 357 (d)) a liability of the taxpayer, such
assumption shall be considered as money received by the taxpayer on the
exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are not
property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If—
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer under this
section with respect to the exchange of such property (determined
without regard to this subsection), and
(C) before the date 2 years after the date of the last transfer which
was part of such exchange—
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the exchange
from the related person which was of like kind to the property
transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this section to
the taxpayer with respect to such exchange; except that any gain or
loss recognized by the taxpayer by reason of this subsection shall be
taken into account as of the date on which the disposition referred to
in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into account
any disposition—
(A) after the earlier of the death of the taxpayer or the death of the
related person,
(B) in a compulsory or involuntary conversion (within the meaning of
section 1033) if the exchange occurred before the threat or imminence
of such conversion, or
(C) with respect to which it is established to the satisfaction of the
Secretary that neither the exchange nor such disposition had as one of
its principal purposes the avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term “related person” means any
person bearing a relationship to the taxpayer described in section 267
(b) or 707 (b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the running of
the period set forth in subsection (f)(1)(C) with respect to such
property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period during which
the holder’s risk of loss with respect to the property is substantially
diminished by—
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such property,
or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section—
(1) Real property
Real property located in the United States and real property located
outside the United States are not property of a like kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States and
personal property used predominantly outside the United States are not
property of a like kind.
(B) Predominant use
Except as provided in subparagraph [1] (C) and (D), the predominant use
of any property shall be determined based on—
(i) in the case of the property relinquished in the exchange, the
2-year period ending on the date of such relinquishment, and
(ii) in the case of the property acquired in the exchange, the 2-year
period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a transaction (or
series of transactions) structured to avoid the purposes of this
subsection—
(i) only the periods the property was held by the person relinquishing
the property (or any related person) shall be taken into account under
subparagraph (B)(i), and
(ii) only the periods the property was held by the person acquiring the
property (or any related person) shall be taken into account under
subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168 (g)(4) shall be
treated as used predominantly in the United States.