Like-Kind Exchanges (13.5 hrs)

At the start of Chapter 1, participants should identify the following major topics for study:
* TCJA, ERTA & TEFRA
* Tax Reform Act of 1986
* Reform Act of 1997, Budget Act of 1998 & 2003 Bush Tax Act
* Tax Reform of 1986 & Revenue Act of 1987
* Disposition of Installment Note
* Stepped-Up Basis on Death
* Related Parties
* Security Issues
* Exchange Benefits

Learning Objectives
After reading Chapter 1, participants will be able to:
1. Identify factors that determine the popularity of exchanging, and specify tax law changes influencing exchange popularity and the impact of current capital gains rates.
2. Recognize the differences between exchanges and installment sales and the cost benefits of each, identify several advantages given to exchanging by recent legislation and specify continuing problems that can arise with an installment sale that can act as an impetus for using an exchange.
3. Specify multiple tax benefits of exchanges and the advantages they create over installment sales.

At the start of Chapter 2, participants should identify the following major topics for study:
* Code language
* Section 1031 as an exception to the general rule of taxation
* Concept of tax deferral
* Rationale
* Continuity of investment
* Administrative convenience
* IRS position
* Mandatory application

Learning Objectives
After reading Chapter 2, participants will be able to:
1. Recognize the requirements of §1031 contained in the Code and identify §1031 as an exception to the general rule of taxation under §1001;
2. Specify instances where the IRS may assert an unintended mandatory application of §1031.

At the start of Chapter 3, participants should identify the following major topics for study:
* Qualified transaction – exchange v. sales
* Held for productive use or investment
* Change in property’s character
* State of mind concept
* Same taxpayer requirement
* Former statutory exclusions from §1031
* Real property restriction
* Like kind property
* Former like-kind requirement for personal property
* Multiple asset exchanges
* Real v. personal property

Learning Objectives
After reading Chapter 3, participants will be able to:
1. Differentiate like-kind exchanges from sales and specify the impact of a party’s intent.
2. Identify excluded property types from qualified types by determining the meaning of “held for productive use in a trade or business” and specifying the impact of holding time.
3. Recognize the focused application of section 1031 as it applies to exchange parties and mixed-use property.
4. Specify the statutory exclusions from §1031 and the types of prop-erty specifically excepted.
5. Recognize the allowance of only real property ask qualified proper-ty in §1031 exchanges and as a consequence the importance of the definition of real property.

At the start of Chapter 4, participants should identify the following major topics for study:
* Partial tax-deferral
* Examples of boot
* Realized gain
* Recognized gain
* Limitation on recognition of gain under §1031
* The definition of “boot”

Learning Objectives
After reading Chapter 4, participants will be able to:
1. Identify “boot” and like-kind property specifying boot’s potential impact on nonrecognition and list examples of boot.
2. Determine taxable “boot,” specify the differences between realized gain and recognized gain recalling the limitation on recognition of gain under §1031.

At the start of Chapter 5, participants should identify the following topics for study:
* Property boot
* Mortgage boot
* Debt relief
* Liability or notes created during the exchange
* Netting boot – the rules of offset
* Property boot given offsets any boot received
* Mortgage boot given offsets mortgage boot received
* Mortgage boot given does not offset property boot received
* R.R. 72-456 & commissions
* Net taxability of gain

Learning Objectives
After reading Chapter 5, participants will be able to:
1. Determine mortgage boot and property boot identifying whether a taxpayer has given or received boot in an exchange and the related tax consequences.
2. Identify the offset rules used to determine net boot and recognize the treatment of closing costs according to R.R. 72-456.

At the start of Chapter 6, participants should identify the following topics for study:
* Losses on like-kind property
* Losses on non like-kind property

Learning Objectives
After reading Chapter 6, participants will be able to:
1. Identify the categories of property received in an exchange and which category is permitted to recognize loss.

At the start of Chapter 7, participants should identify the following topics for study:
* Adjustments to basis
* Allocation of basis
* Anti-churning rules

Learning Objectives
After reading Chapter 7, participants will be able to:
1. Identify the general carryover basis rule to calculate a taxpayer’s basis in acquired property.

At the start of Chapter 8, participants should identify the following topics for study:
* ERTA
* TRA ’86 & OBRA ‘93
* IRS depreciation guidance
* Land v. improvements
* Section 1245 & Section 1250
* Recapture property
* Recapture exceptions prior to ERTA
* Issues after ERTA
* Allocation of basis when recapture applies
* Investment credit recapture

Learning Objectives
After reading Chapter 8, participants will be able to:
1. Identify property depreciation recovery periods for property used in a trade or business or held for production of income and deter-mine carryover basis in an exchange for acquired property.
2. Recognize the distinction between land and depreciable improve-ments, and identify the recapture provisions and their impact on gain that would otherwise be recognized.

At the start of Chapter 9, participants should identify the following topics for study:
* Holding period
* Treatment of gain or loss
* Treatment of installment sales prior to 1980
* Treatment of installment sales after after 1980
* Exchanges between related parties
* Two-year limitation
* Sections 267, 707, 453 and 1239
* Leverage
* Splitting partners
* Reporting an exchange

Learning Objectives
After reading Chapter 9, participants will be able to:
1. Specify the holding period of acquired property and identify the character of gain or loss recognized in an exchange.
2. Recognize the danger of exchanges between related parties and de-termine how §§267, 707, 453, and 1239 work together with §1031.
3. Specify ways to cash out one or more partners as part of an ex-change by a partnership and choose the proper tax forms to report an exchange.

At the start of Chapter 10, participants should identify the following topics for study:
* Meeting the napkin test
* Components
* Figures for computation
* Economic balance & “evening out”
* Examples of balancing multiple party exchanges
* Locating boot
* Finding exchange property
* Refinancing
* “Coleman” solution
* Wrap-around mortgage

Learning Objectives
After reading Chapter 10, participants will be able to:
1. Recognize a simple test for clients to analyze if an exchange is com-pletely tax-deferred and identify the basic computation figures neces-sary when balancing an exchange.
2. Determine how to balance multiple party exchanges using the “in and out test”, eveners, and the trade-up rule.

At the start of Chapter 11, participants should identify the following topics for study:
* Two-party exchanges and variation
* Three-property-plus exchanges and variation
* Three-party “Alderson” exchange and variations
* Three-party “Baird Publishing” exchange and variations
* Four-party “Coupe” exchange
* Four-party “Mercantile Trust” exchange

Learning Objectives
After reading Chapter 11, participants will be able to:
1. Identify the mechanics of a two-party and three-party “Alderson” exchange including related variations involving the cash out of a par-ty.
2. Determine the transactional flow of a traditional three-party ex-change including variations to the format and recall procedural guide-lines to ensure mechanics comply with §1031 provisions.
3. Determine the elements of a three-party “Baird Publishing” ex-change, specify variations, and identify categories of four-party ex-changes.

At the start of Chapter 12, participants should identify the following top-ics for study:
* Delayed exchange v. delayed close
* Previously used formats
* Starker case
* TRA ‘84
* Format & structure
* Security for performance – use & control of cash
* Delayed (deferred) exchange regulations
* Identification requirements
* Actual & constructive receipt rule
* Delayed exchange agreement

Learning Objectives
After reading Chapter 12, participants will be able to:
1. Recall the evolution of delayed exchanges from the Starker case to their present use and the popularity of delayed exchanges, and speci-fy current requirements and restrictions.
2. Recognize the requirements of the final regulations for delayed ex-changes by identifying qualifying transactions, permitted intermediar-ies, tax treatment of interest, and use of escrow and trust accounts.

At the start of Chapter 13, participants should identify the following top-ics for study:
* Warehousing
* Reverse exchanges – R.P. 2000-37
* R.P. 2004-51
* The pot method
* Escrow

Learning Objectives
After reading Chapter 13, participants will be able to:
1. Identify the purpose and format of longtime exchange techniques called “warehousing” and “pot method.”

At the start of Chapter 14, participants should identify the following top-ics for study:
* Roles of accommodators
* Sale & lease-back

Learning Objectives
After reading Chapter 14, participants will be able to:
1. Identify the differences among an accommodator, strawman, and an intermediary, determine how using such parties can facilitate ex-changing, and recognize a sale and lease-back transaction and associ-ated exchange complications.