KPMG report - Underwater property and like-kind exchanges 

February 25: The like-kind exchange rules may allow taxpayers to defer gain (or loss) realized on the exchange of property.

Qualifying for like-kind exchange treatment becomes more complicated if the property exchanged is “underwater”—that is, the debt on the property exceeds its fair market value. The IRS in a private letter ruling found that the exchange of underwater property with the lender in satisfaction of the debt could qualify for like-kind exchange treatment.


Read a February 2013 report [PDF 206 KB] that considers what the IRS ruling means for taxpayers in similar situations: KPMG’s What’s News in Tax: Underwater Property and Like-Kind Exchanges




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