Warning

Info

Warning

Info

Warning

Info

LSDefine

Simple English definitions for legal terms

tax-deferred exchange

Read a random definition: all-steps rule

A quick definition of tax-deferred exchange:

A tax-deferred exchange is when someone trades one investment for a similar one instead of getting money. This lets them delay paying taxes on any profit they made until they sell the new investment. They have to pick a new investment within 45 days and finish the trade within 135 days. The new investment has to cost the same or more than the old one. They can pick more than one new investment to meet this rule. The value of the old investment will change to show the new trade, so they pay the right amount of taxes later.

A more thorough explanation:

Tax-deferred exchange is a process where investors and organizations can replace one investment with a similar one instead of keeping the proceeds. This exchange allows the investor or organization to defer capital gains taxes until the new investment is sold for the proceeds. The exchange is called a 1031 exchange and is governed by section 1031 of the Federal tax code.

Let's say an investor owns a rental property that has appreciated in value. If the investor sells the property, they will have to pay capital gains taxes on the profit. However, if the investor uses a tax-deferred exchange, they can sell the rental property and use the proceeds to buy another rental property without paying capital gains taxes. The new property must be of equal or greater value than the original property, and the exchange must be completed within 180 days.

Another example is a business owner who wants to sell their business and use the proceeds to buy another business. By using a tax-deferred exchange, the business owner can defer paying capital gains taxes on the sale of their business until they sell the new business.

These examples illustrate how tax-deferred exchanges can be beneficial for investors and organizations who want to defer paying capital gains taxes and reinvest their profits into similar investments.

tax withholding | tax-exempt income

Warning

Info

General

General chat about the legal profession.
main_chatroom
👍 Chat vibe: 0 👎
Help us make LSD better!
Tell us what's important to you
Dkk
19:42
SEO is big money
2016 pushed the conservative party into populism irreversibly
Dkk
19:43
Maybe, but if this is populism, then every election is populist.
19:43
@Dkk: yeah register 1 website and every swinging tom dick and harry calls/emails/texts to 'help with seo'. like bruh, if YOU found it, what i am doing is working
Dkk
19:43
Indeed!
19:48
wasp, i think people are hopeful for a gov who at least attempts to care about the common man
MIAMI A
[] AromaticTroubledDormouse
20:55
How does one know if they are UR1 or UR2?
[] AromaticTroubledDormouse
20:56
CONGRATS MACAQUE!
TY
got a random stanford email and almost had a heart attack
ALSO CONGRATS!
Congrats1!
21:15
Miami A, yall I'm so excited I could cry.
21:15
Feel like I can finally stop holding my breath!! Whew!!!
[] baddestbunny
22:16
every time I get accosted by a strange man who follows me around because my male coworkers were too busy talking to walk me back to my car I get closer to saying we need to bring back traditional gender roles
Dkk
22:32
Nice! @Macaque
Dkk
22:32
@Aromatic, Have to guess.
Dkk
22:33
That sucks @Bunny do you have to go to the hospital?
[] baddestbunny
22:40
I said accosted not assaulted
23:35
guys. my notre dame address just went long is this good or bad
1a2b3c4d26z
23:37
Oooooo me too
23:37
omg is this good or bad
Dkk
23:47
Idk if gender roles are gunna fix that then.
23:49
it looks like most people who applied in october last cycle didn't get a decision until january... does it even mean anything that our addresses went long??
hows ED 2 compared to ED 1?
Dkk
0:10
No idea
windyMagician
0:34
reporting live to say my ndls address also went long
does it mean anything ^
Dkk
2:21
NDLS and Fordham took a very long time last year. It's good info for people to know.
LSD+ is ad-free, with DMs, discounts, case briefs & more.