CPA REG • IRC §1031

Like-Kind Exchange Lab

Move the debt and boot. Watch taxable gain surface—and the rest hide inside basis.

Exchange facts

Adjusted basis given

FMV property given

FMV property received

Cash boot received

Liability relieved

Liability assumed

Economic check loads here.

Tax results

Amount realized—

Realized gain—

Boot received—

Recognized gain—

Deferred gain—

New property basis—

Where the gain goes

Realized gain splits into taxable gain now and deferred gain embedded in the replacement property's basis.

Recognized Deferred

Calculation ladder

Amount realized

Realized gain

Boot received

Recognized / deferred

Basis bridge

Replacement FMV

−

Deferred gain

Tax basis carried forward

Memory hook: FMV − deferred gain = new basis.

Debt netting rule used here: only excess debt relief over debt assumed becomes debt boot. Cash received remains boot; assumed debt does not erase cash boot.

Load a scenario

Checkpoint

Old basis $140,000; replacement FMV $230,000; cash $20,000; no debt. What gain is recognized?

Amount realized = $250,000; realized gain = $110,000; boot = $20,000. Recognize the lesser amount: $20,000.

Scenario debrief

Choose a scenario to load it into the calculator; then return to Calculator or Gain Trace.

Why real property only?

The 2017 cutover

The Tax Cuts and Jobs Act amended IRC §1031 for exchanges completed after December 31, 2017. Congress limited nonrecognition to exchanges of real property. Before that change, qualifying business or investment personal property—such as equipment—could potentially qualify.

Post-2017: machinery, vehicles, artwork, aircraft, and other personal property do not qualify for §1031 deferral.

Qualification gate

Property type
Both sides must be qualifying real property.

Purpose
Held for productive use in a trade/business or for investment—not primarily for sale.

Like-kind
For U.S. real property, nature or character matters; grade or quality generally does not.

Geography
U.S. real property is not like-kind to real property outside the United States.

Included here

Land ↔ buildingRental ↔ raw landBusiness realty

Not modeled

Exchange expenses, non-cash boot, related-party rules, depreciation recapture, identification/receipt deadlines, qualified intermediaries, and multi-asset exchanges. Those can change a full return computation.

Exam line: realized gain measures economics; recognized gain measures current tax; deferred gain reduces the replacement property's basis.

Like-Kind Exchange & Boot Calculator