Selling or exchanging business or investment property usually leads to a taxable capital gain or
loss. For example, if a share of stock or a building or other asset used in a business is sold for
more than its cost basis, the sale generates a taxable capital gain. However, the tax otherwise
due can be deferred when certain business or investment property is exchanged for property of a “like-kind" in ways that comply with the tax rules.
The traditional prototype case involved direct exchanges, e.g., the owner of an apartment building exchanged it for another apartment building that was more suitable. Over time, the definition of eligible exchanges has been expanded. In recent years, most like kind exchanges of real estate have involved complex threeparty transactions facilitated by qualified intermediaries. In addition, the most common like-kind exchanges are now those involving the trade-in of vehicles for replacement vehicles and vehicle fleets, e.g., by rental car companies, farmers, and businesses. More