Multiple Asset Exchange Services
Many times Exchangers own a business or investment asset that consists of both real and personal property, such as a hotel or restaurant. An exchange of such a multiple asset property creates issues when trying to allocate the various assets into their proper like-kind categories using a property by property comparison. Another issue is the allocation of the deferred gain and basis among the various exchanged assets. However, by utilizing a Multiple Asset Exchange structure, Exchangers can realize a greater benefit than if they had structured the transaction as separate exchanges for each various type of asset.
Tax deferred exchanges fall into two distinct types: real property and personal property. Both types of property must be held for productive use in a trade or business, or for investment purposes. However real property can only be exchanged for other real property and personal property assets can only be exchanged for other personal property assets since real property and personal property are not like-kind to each other. For example, in the exchange of an apartment building for another apartment building, the value of the relinquished real estate must be matched against the replacement of real estate, and the value of the relinquished washers, dryers, refrigerators and stoves must be matched against the replacement appliances.
The goodwill of one business is never considered to be like-kind to the goodwill of another business, and thus its value may not be included among the assets exchanged, even though in some business sales, goodwill may be the single most valuable asset.
A careful review of most commercial real property transactions will reveal a large amount of depreciated personal property being sold in addition to the real property. By taking time to review the impact of these additional assets, and contemplating a Multiple Asset Exchange, an Exchanger may be able to defer much more of the taxable gain than the Exchanger originally considered.