The IRS recently reminded taxpayers that like-kind exchanges are now generally only available for exchanges of real property. This change was enacted as part of the Tax Cuts and Jobs Act passed in December of last year. Now, exchanges of personal or intangible property do not qualify for nonrecognition of gain or loss as like-kind exchanges. Personal or intangible property effected by the Tax Cuts and Jobs Act includes machinery, equipment, vehicles, artwork, collectibles, patents, as well as other intellectual property.
To be eligible for like-kind exchange treatment, real property must be held for use in a trade or business or investment. Thus, real property held primarily for sale is ineligible for like-kind exchange treatment. Real property includes land and generally anything built on the land or attached to it.
There is a transition rule that provides like-kind exchange treatment for some exchanges of personal or intangible property that would otherwise be ineligible for like-kind exchange treatment under the Tax Cuts and Jobs Act. This transition rule may apply if a taxpayer disposed of personal or intangible property, or received replacement property, on or before December 31, 2017.