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)Taxpayer expects his or her effective tax rate to increase in the future.
E)All of the above.

Question

Quizplus · Accepted Answer

All of the listed options could potentially motivate a taxpayer to avoid like-kind exchange treatment.

A taxpayer with unused NOL carryovers may prefer to recognize a gain from the sale of property in order to offset the losses and potentially receive a tax refund.

A taxpayer with unused general business credit carryovers may prefer to recognize a gain from the sale of property in order to reduce the carryovers.

A taxpayer with suspended or current passive activity losses may prefer to recognize a gain from the sale of property in order to offset the losses and reduce their passive income tax liability.

A taxpayer who expects their effective tax rate to increase in the future may prefer to recognize a gain from the sale of property in the current year when their tax rate is lower, rather than deferring the gain and potentially paying a higher tax rate in the future.

Which of the Following Might Motivate a Taxpayer to Try