Generally, if you were a CPA, would you advise your client to enter into a like-kind...

Generally, if you were a CPA, would you advise your client to enter into a like-kind of exchange if they were looking to sell one piece of land and acquire another piece of land? Why?

Why would you not suggest your client into a like-kind exchange? Give specific examples.

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Expert Solution

The client may be advised to enter into a like kind of exchange which may be in the form of selling one / old piece of land and acquiring one / new piece of land. The entire advise will depend upon the actual objective of the client. There are many benefits of exchange which include deferment of long term capital gains taxes on the sale of investment real estate when it is exchanged for other investment real estate of equal or greater value than the real estate being exchanged. Apart from benefit from taxes, other benefits include replacing low or non income producing property with high income producing property, replacing an old property to minimise maintenance cost, replacing a property with another in suitable locality, diversification of risk by selling one big property and replacing the same with many smaller ones.

Accordingly client may be advised to exchange piece of land depending upon its objective or benefits client is looking for.

ekkarill92 answered 1 year ago

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