Related parties’ property exchange doesn’t qualify as like-kind

Description

Abstract: Like-kind exchanges under Internal Revenue Code Section 1031 provide a valuable tool for taxpayers to defer taxes on capital gains. The exchanges are subject to some strict rules that are intended to prevent tax avoidance scams. This article discusses a recent U.S. Tax Court case in which the parties to a like-kind exchange ran into one of those restrictions — the related-party limitation — and ended up with a higher-than-expected tax bill. A short sidebar reviews how the Tax Cuts and Jobs Act (TCJA) affected like-kind exchanges. The Malulani Group, Limited, and Subsidiary v. Commissioner, No. 16-73959, Ninth Cir., Oct. 9, 2018