Like-kind exchanges - not so simple once you dig in
roadrunner
Posts: 28,313 ✭✭✭✭✭
I lifted my post from another thread as it has some worthwhile information that keeps coming up:
Lawyer Armen R. Vartian did a great piece on this in Coin World (9/4/2006). Since this topic has been discussed many times here this article was well worth keeping. There are numerous restrictions assuming Vartian's opinions are correct. In summary:
limited circumstances only:
arms length's parties (not relatives for example or your business buddy)
related parties must each hold the property for at least 2 years!!!
held purely for investment purposes (not a hobby) - profit motive!!
collectors who act as dealers for tax purposes to deduct expenses can not use like-kind-exchange
dealers trading their stock is not allowed
item must be of "like-kind" (no bullion items since that's cash)
findings against some trades in different metals have been disallowed - no guarantee that a trade of a large cent for a silver
dollar grouping would be allowed for example.
must file form 8824 for the exchange (see code 1031 exchanges) to trigger the IRS - that's always fun to red flag you for an audit.
barter exchanges (such as coins for residences does not fly)
The 2 year hold for both parties, profit motive, investment coins put back for several years, eliminates most every transaction from consideration. I can't believe the 2 year rule for both parties. You basically have to monitor another investor's time frame to legitimize your own holding period!!!! But that's what Vartian is saying.
Good luck with this one if what Vartian says is correct. Having to go through this many hoops essentially destroys the concept of an exchange. In other words, uncle doesn't want this being done.
roadrunner
Lawyer Armen R. Vartian did a great piece on this in Coin World (9/4/2006). Since this topic has been discussed many times here this article was well worth keeping. There are numerous restrictions assuming Vartian's opinions are correct. In summary:
limited circumstances only:
arms length's parties (not relatives for example or your business buddy)
related parties must each hold the property for at least 2 years!!!
held purely for investment purposes (not a hobby) - profit motive!!
collectors who act as dealers for tax purposes to deduct expenses can not use like-kind-exchange
dealers trading their stock is not allowed
item must be of "like-kind" (no bullion items since that's cash)
findings against some trades in different metals have been disallowed - no guarantee that a trade of a large cent for a silver
dollar grouping would be allowed for example.
must file form 8824 for the exchange (see code 1031 exchanges) to trigger the IRS - that's always fun to red flag you for an audit.
barter exchanges (such as coins for residences does not fly)
The 2 year hold for both parties, profit motive, investment coins put back for several years, eliminates most every transaction from consideration. I can't believe the 2 year rule for both parties. You basically have to monitor another investor's time frame to legitimize your own holding period!!!! But that's what Vartian is saying.
Good luck with this one if what Vartian says is correct. Having to go through this many hoops essentially destroys the concept of an exchange. In other words, uncle doesn't want this being done.
roadrunner
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roadrunner