Question

Business Expense

Forum|Forum|6 years ago
April 2, 2020
1 reply
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I traded in a business vehicle for another business vehicle. When I enter the information requested in Turbo Tax I end up with a taxable gain. I thought a like kind exchange is a tax deferred transaction that allows for the disposal of an asset and the purchase of a similar asset without generating a capital gain tax liability.

Can someone tell me how I should enter this in TurboTax correctly so not to incur the capital gain?

Thanks

TurboTax Home & Biz Windows

GiseleD

The 2017 Tax Cuts and Jobs Act limited like-kind exchanges to only real property. Please see the below information from IRS.gov:

WASHINGTON — The Internal Revenue Service today reminded taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property. The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead.

Effective Jan. 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or for investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

Unfortunately, your transaction does not qualify for nonrecognition of gain.

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