Like-Kind exchange

[RWG1950]

My understanding is that non-business like-kind exchanges ended with TCJA in 2017.
Customer had inherited (with her brother) 1/2 of a house from their father in 2014.
Brother (but not the customer) used it as his personal residence (for no rent) until July 2019 sale. (sale proceeds split 50/50)
$ 20,000 LTCG incurred by customer. Customer (2 mos. later) bought land w/proceeds of sale.
Customer feels she should be able to defer gain on house sale via like-kind exchange.
I don't think the LTCG can be deferred. Am I correct on this ?
Thanks for comments.

[TAXNJ]

Where have you researched so not to repeat your research?

The Tax Book 9-3
Like kind property.
To qualify for the nonrecognition rules, there must be an exchange of like-kind property. Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. The exchange of real estate for real estate is an exchange of like-kind property.An exchange of personal property for real property does not qualify as a like-kind exchange.

[RWG1950]

In my Taxbook, chapter 9-3 seems to deal with depreciation, not like-kind exchanges.
Chapter 6-17 is what I had reviewed.
TTB seems to say both the property traded & received must be held for productive business or investment use.
That the property exchanged had personal use & had not been rented out makes me think it would not be an eligible transaction.
Think I'm wrong on this ?

[TAXNJ]

In my Taxbook, chapter 9-3 seems to deal with depreciation, not like-kind exchanges.
Chapter 6-17 is what I had reviewed.
TTB seems to say both the property traded & received must be held for productive business or investment use.
That the property exchanged had personal use & had not been rented out makes me think it would not be an eligible transaction.
Think I'm wrong on this ?

when using the Web Library, the depreciation section 9-3 covers Like Kind Exchanges. Yes, The Tax Book 1040 & Small Business book is 6-17.

Both state that “An exchange of personal property for real property does not qualify as a like-kind exchange.”

As you see in section 6 to help with your post:


The Tax Book 6-17

Like-Kind Property

Qualifying property. Both the property traded and the property received must be held for productive use in the taxpayer’s trade or business or for investment purposes.

Excluded property. The rules for like-kind exchanges do not apply to exchanges of the following property.

• Real property used for personal purposes such as a home.

• Vacation homes held for appreciation but used for recreation are not considered investment properties for like-kind exchanges. (Moore, T.C. Memo. 2007-134)

• Real property held primarily for sale (such as inventory).

• Partnership interests.

• Any personal or intangible property.

Note: Excluded property may be eligible for a nontaxable exchange under other rules.

[Burke]

Customer (2 mos. later) bought land w/proceeds of sale..

Under the circumstances you describe it would disqualify it (even if it were allowed under the other rules). It must be a simultaneous transaction OR meet the strict time frames and procedures detailed in 1031 transactions. Normally a third-party representative handles the transactions, and the funds. If they got the money, and then he later bought something else, it won't wash on that alone. It cannot be a retroactive decision.

[jmcdtax]

IR-2018-227, November 19, 2018

WASHINGTON — The Internal Revenue Service today reminded taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property. The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead.

Effective Jan. 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or for investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

[TAXNJ]

Yes, The TaxBook covers it well. See:

The Tax Book 6-17

Like-Kind Property

Qualifying property. Both the property traded and the property received must be held for productive use in the taxpayer’s trade or business or for investment purposes.

Excluded property. The rules for like-kind exchanges do not apply to exchanges of the following property.........