Tax Planning Techniques – The Like Kind Exchange

The United States will permit nonresident alien taxpayers, both individual and foreign corporations to defer any taxes on gain from the sale of United States real estate. These taxes may be deferred and paid at a later point in the event a foreign investor continues the real estate investment; by reinvesting their profits in other U.S. real estate ventures. Taxes on such a transaction will not be collected until the real estate property is sold for cash.

Have a question? Contact Richard Lehman.

Your comments are always welcome.

Richard S. Lehman is a graduate of Georgetown Law School and obtained his Master’s degree in taxation from New York University. He has served as a law clerk to the Honorable William M. Fay, U.S. Tax Court and as Senior Attorney of the Interpretative Division in the Chief Counsel’s Office of the Internal Revenue Service in Washington D.C., the IRS’s internal law firm.

Mr. Lehman has had extensive experience with all areas of the Internal Revenue code that apply to American taxpayers and nonresident aliens and foreign corporations investing or conducting business in the United States, as well as U.S. citizens and domestic corporations investing abroad.

Mr. Lehman regularly works with law firms, accountants, businesses and individuals struggling to find their way through the complexities of the tax law.

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1 comment on “Tax Planning Techniques – The Like Kind Exchange”

  • The big caveats are that one must meet certain qualifying use standards. The real estate investment property can’t be for personal use. Vacation or second homes which are not held as rentals do not qualify. The transaction must take the form of an “exchange” rather than just a sale of one property with the subsequent purchase of another. The property being sold and the new replacement property must both be held for investment purposes or for productive use in a trade or a business. They must be “like-kind” properties generally meaning one piece of commercial, industrial or investment real estate for another.The investor must sell the first property and identify a replacement property within forty five days, and then close on that new property within one hundred and eighty days. There is also a reverse exchange, which allows an investor to identify the replacement property and purchase it first, as long as the original investment property is sold within a certain period of time.

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