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No like-kind exchange for personal properties

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in Small Business Tax

Q. I live in a home that I’m holding for sale to the public. If I swap the home for a boat where I will live year-round, can I avoid any tax on the home’s appreciation? L.C., Melbourne, Fla.

A. Not so fast. You seem to be referring to a “like-kind exchange” of real estate. Assuming that the properties are similar in nature, you wouldn’t pay any current tax on the deal (except to the extent that you receive any “boot”). For this purpose, a residence and a boat with living accommodations may qualify, but here’s the catch: The like-kind exchange rules would apply only if both the home and the boat are treated as rental properties. Tip: If you sell the home, you may be able to exclude the first $250,000 of gain from tax under the home-sale exclusion ($500,000 if you’re married and file a joint return).

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