When real property is sold for a gain, we always try to find ways to defer recognizing income so it won’t be necessary to send a check to Uncle Sam. There are two provisions within the Internal Revenue Code that allow the taxpayer to defer recognition of immediate taxable gain in the year of sale: installment sales and like-kind exchanges. Knowing how and when to utilize these provisions makes the Accounting and Finance Professionals very valuable to either their client or the entity they work for. We will also discuss recent proposals which could impact the future of these two provisions.
Learning Objectives
- Learn when and how to utilize the provisions of IRC Section 453 in order to defer recognizing gain on the sale of real property via installment sales
- Learn when and how to utilize the provisions of IRC Section 1031 in order to defer recognizing gain on the sale of real property via a like-kind exchange
Major Topics
- How does the IRC define an installment sale under Section 453?
- When can a taxpayer utilize the provisions of IRC Section 453?
- When should a taxpayer utilize the provisions of an installment sale and when should it be avoided
- How does the issue of a “dealer” vs. a “non-dealer” impact the use of the installment sale method
- How to report an installment sale when related parties are involved
- How to calculate an installment sale
- How has the Tax Cuts and Jobs Act impacted the use of the Installment Sale Method
- What is a like-kind exchange as defined by IRC Section 1031
- When can a taxpayer utilize the provisions of IRC Section 1031
- What types of real property are eligible for like-kind exchange treatment and what types are not
- What is “boot” and how does it impact the like-kind exchange deferral
- How to calculate a like-kind exchange including any taxable portion
- How has the Tax Cuts and Jobs Act impacted the use of like-kind exchanges
