Like-Kind Exchange
Categories: Accounting, Company Management
See: Like-For-Like Sales.
Just a place where you can find your kind of people. For you, the local leather bar might be your like-kind exchange. Or maybe you find your like-kind exchange under the highway overpass at midnight on Saturday nights. Or at the rat-fighting pits. We're not here to judge.
Actually, though, a like-kind exchange is a stipulation in U.S. tax law. It describes what to do with transactions where an asset is exchanged for another similar asset.
You and your neighbor just trade houses. That situation would define a like-kind exchange. One asset flipped for another, similar asset.
Usually, the series of transactions is more complicated. You sell your house. Then, a few months later, you buy a new new house with the cash you earned from the initial sale.
The tax-law implication comes in because you don't want to have to pay taxes on that first sale. If you sell a house for $500,000 and then buy another house for $510,000, you don't want to face down a $100,000 tax bill for essentially moving across the street.
These situations are also known as 1031 exchanges.
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Finance: What is a 1035 Exchange?1 Views
Finance a la shmoop....what is a 1035 exchange? well why don't they
give these things a name like what pathos is there in a number well it [Arrow pointing to star in the solar system]
makes your life miserable remembering all these numbers and frankly doesn't
make our life any easier writing pithy epithets about them you know as we go
but all right we'll try here we go...A 1035 exchange is a swap more
specifically it's a swap relating to life insurance policies or annuities you
have one annuity or life insurance policy and want to exchange it for [Two life insurance policy documents]
another of similar value so you use at 1035 exchange to do it's like a legal
structure why well because a 1035 is tax-free.. tax-free yeah that's good why
would there be a tax when you're changing policies well an insurance
policy is just another form of an investment and with it comes a gain
usually over time so if you're exchanging an in theory you [Insurance policies exchanging]
could be realizing a gain that's taxable so if one policy fit your feet from age
25 to 45 and then it tripled in value over that time well you'd have
"realized a gain" if you sold it for cash and then use that cash to buy
another and you'd have a whole lot less cash left over after the feds you know
taxed you and being able to deploy that 1035 exchange tax loophole well you get
to keep all the value in that policy and use it to buy all the value of another
policy thank you insurance industry lobby and yeah you'll be dead but well [Richie Richpants gravestone]
others will too