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    Tax planning scenarios for a like kind exchange

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    Mr. Tucker owns investment land (690,000 fmv and $228,000 adjusted basis) that he is interested in selling. Several prospective purchasers have offered to pay cash, but Mr. Tucker wants to avoid recognizing his entire gain in the year of sale. Accordingly, he is considering selling the land to the Tucker Family Corporation in return for a 20-year, 9% corporate debt obligation. The corporation could then sell the land to an unrelated party for cash. Will Mr. Tucker's strategy be effective in deferring gain in recognition on sale of the land?

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    Solution Preview

    There are four scenarios for comment:

    1. The transfer as proposed will not be viewed as a like-kind exchange because investment property swaps don't include notes or bonds. Neither of them is like kind property and therefore the gain would be triggered.

    2. The problem does not tell us about ownership in Tucker ...

    Solution Summary

    The solution presents four options to accomplish the sale or trade of the property including the tax effects in each.