Which of the following might motivate a taxpayer to try to avoid like-kind exchange treatment?
A) Taxpayer has unused NOL carryovers.
B) Taxpayer has unused general business credit carryovers.
C) Taxpayer has suspended or current passive activity losses.
D) Only a. and b. are correct.
E) a., b., and c. are correct.

Question

Quizplus · Accepted Answer

All of the options listed (unutilized NOL carryovers, unutilized general business credit carryovers, and suspended or current passive activity losses) generate tax benefits that directly reduce the taxpayer's tax liability. A like-kind exchange delays the payment of taxes on the gain from the sale of the initial asset. However, if the taxpayer is already in a loss or credit position, deferring a tax obligation that would otherwise take them out of this position is not desirable. Therefore, taxpayers in these positions may prefer to pay taxes on the original transaction immediately rather than participate in a like-kind exchange.

Which of the Following Might Motivate a Taxpayer to Try