Terry exchanges real estate (acquired on August 25,2010)held for investment for other real estate to be held for investment on September 1,2016.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 25,2010.

Question

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When real estate held for investment is exchanged for other real estate held for investment, the realized gain can be deferred if certain requirements are met. One of those requirements is that the taxpayer must receive property that is of a like-kind. Additionally, the taxpayer's basis in the new property will generally be the same as the basis in the old property, adjusted for any gain or loss recognized in the exchange. Therefore, in this case, since Terry's realized gain of $10,000 is not recognized and the adjusted basis for the new real estate is a carryover basis of $80,000, Terry's holding period for the new real estate begins on the date the old real estate was acquired, which is August 25, 2010.

Terry Exchanges Real Estate (Acquired on August 25,2010)held for Investment