Personal property held for investment or for productive use in a trade or business may qualify for Tax Deferred Exchange treatment. If the sale of such personal property will result in a capital gain tax, the taxpayer may want to consider an exchange. The following are examples of types of personal property that can be exchanged:

Corporate turbo prop plane
Corporate jet
Relinquished Property
Replacement Property
Dental practice
Dental practice
Manufacturing equipment
Manufacturing equipment
Garbage routes
Garbage routes
Restaurant equipment
Restaurant equipment

The "like-kind" requirement is more challenging for personal property exchanges than it is for real property exchanges. To be of "like-kind," the relinquished and replacement depreciable tangible personal property must be in either the same General Asset Class or Product Class. For example, the exchange of a fixed based operator may require a separate exchange for each different general asset class: courtesy cars, refueling equipment, computer equipment and aircraft. The General Asset Classes are as follows:

• Office furniture, fixtures and equipment;
• Data handling equipment, except computers;
• Information systems (computers, etc.);
• Airplanes and helicopters, provided they are not used commercially;
• Automobiles, including taxis;
• Buses;
• Light general purpose trucks;
• Heavy general purpose trucks;
• Railroad cars and locomotives;
• Tractor units;
• Trailers and trailer-mounted containers;
• Vessels, barges, tugs, except those used in marine construction;
• Industrial steam and electric generation and/or distribution systems

The Product Classes are from Division D of the Standard Industrial Classification Manual of 1987 that has recently been merged into the new North American Industry Classification System. If the depreciable tangible personal property does not fall within either the General Asset Class or Product Class the exchange can still be completed as long as the relinquished and replacement properties are still considered to be "like-kind."

An exchange of intangible personal property and non-depreciable personal property qualifies only if the exchanged properties are of a "like-kind" since there are no like classes provided for these types of properties as in depreciable tangible personal property. The test of whether intangible personal property is of a "like-kind" depends upon the nature or character of the rights involved and also on the nature or character of the underlying property to which the intangible personal property relates. For example, a copyright on a novel can be exchanged for a copyright on another novel but a copyright on a novel cannot be exchanged for a copyright on a song because they are considered not "like-kind."

Goodwill of one business, however, is not considered "like-kind" with goodwill of another business and is, therefore, not eligible for exchange treatment. Covenants not to compete are not subject to capital gain taxes, and therefore, are not exchangeable. Livestock of different sexes is also not considered "like-kind" property.

Tax advisors are essential for a successful personal property exchange. The advisor will help determine values, allocate sale price and purchase price to the elements of the transaction and recommend the terms of the transaction.