Terry exchanges real estate (acquired on August 25, 2012) held for investment for other real estate to be held for investment on September 1, 2018. None of the realized gain of $10,000 is recognized, and Terry's adjusted basis for the new real estate is a carryover basis of $80,000. Consequently, Terry's holding period for the new real estate begins on August 25, 2012.

Question

Quizplus · Accepted Answer

When property is exchanged for like-kind property and certain requirements are met, any realized gain is not recognized for tax purposes and the basis in the new property is generally a carryover basis from the old property. Additionally, the holding period for the new property includes the holding period of the old property. Therefore, Terry's holding period for the new real estate would begin on August 25, 2012, the date the original real estate was acquired.

Terry Exchanges Real Estate (Acquired on August 25, 2012) Held