Although like-kind exchanges have been almost routine for decades for trades involving machinery, equipment and business vehicles,1 the use of like-exchanges for real estate has become much more widespread in recent years.2 Until 1989, there were no limitations imposed on related-party like-kind exchanges. The 1989 amendment imposing limits on related party like-kind exchanges3 was motivated by concern overthe tax avoidance potential of transactions in which related parties enter into like-kind exchanges involving low-basis property (which the owner contemplates selling) for high basis property with the new owner of the high basis property selling the property received at a reduced gain (or even a loss) because of the shift to that property of the high basis in the property relinquished.4 A 2009 Tax Court decision, Ocmulgee Fields, Inc. v. Commissioner,5 has underscored the hazards of violating the related party rules.
Harl, Neil E.
"More on Related-Party Like-Kind Exchanges,"
Agricultural Law Digest: Vol. 20
, Article 1.
Available at: http://lib.dr.iastate.edu/aglawdigest/vol20/iss17/1