This code specifies that if an
asset, usually some form of real estate such as land or a
building, is sold and the proceeds of the sale are then
reinvested in a like kind of an asset then no gain or loss is
recognized, allowing the deferment of capital gains taxes.
In order to qualify certain rules must be followed. Broadly these rules are as follows :
In order to qualify certain rules must be followed. Broadly these rules are as follows :
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Both the relinquished property and the replacement property must be held either for investment or for productive use in a trade or business. A personal residence cannot be exchanged.
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The asset must be of like kind. Real property must be exchanged for real property. Personal property must be exchanged for personal property.
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The proceeds of the sale must be invested in a like kind asset within 180 (property must be identified within 45 days) days of the sale