Nontaxable dispositions: §1031 like-kind exchanges and §1033 involuntary conversions

The rules, one page each

1. Which property qualifies for a like-kind exchange after TCJA? Real property held for business or investmentSort it

   §1031 defers gain for exchanges of like-kind real property held for productive use in a trade or business or for investment; property held primarily for sale does not qualify, and personal property is not eligible.

2. Basis of replacement property in a §1031 exchange (no debt): carryover plus adjustmentsWorked example

   When no liabilities change, basis of like‑kind property received = adjusted basis of property given up + gain recognized + cash paid − cash received. Recognized loss is disallowed.

3. Debt relief vs debt assumed: net liabilities are boot in a §1031 exchangeContrasting cases

   Boot includes cash plus net liability relief: boot = cash received + liabilities relieved − liabilities assumed − qualified exchange expenses. Recognized gain is limited to the lesser of realized gain or boot.

4. 1031 with non-like-kind property: equipment, inventory and other boot after TCJAWorked example

   In a §1031 exchange, only like‑kind real property qualifies; personal property and inventory transferred or received are boot and trigger recognition to the extent of their value, often analyzed by asset class.

5. 1031 deferred exchange: 45 day ID, 180 day receipt, no cashTimeline

   For a deferred Section 1031 exchange, identify replacement property in writing within 45 days after transferring the relinquished property and receive it by the earlier of 180 days after transfer or the tax return due date for the year of transfer, including extensions. Actual or constructive receipt of sale proceeds by the taxpayer disqualifies the exchange.

6. Involuntary conversions under §1033: compute recognized gain, replacement period, and basisWorked example

   Under §1033, recognized gain equals the excess of the amount realized (award or insurance) over the cost of qualifying replacement property (limited to realized gain). Basis of replacement property equals its cost minus the deferred gain. Replacement period is generally 2 years, or 3 years for condemnations of real property.