JMc wrote:
- quote -

snip

- quote -

I don't think the exchange qualifies as like kind. See Reg.
Sec. 1.1031(a)-1(c). Trucks and autos are in different
asset classes, and therefore are not like kind property; see
IRS Publication 544, p. 11.

Katie in San Diego

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"Mark A. Hvasta, CPA" <gcollect1[at]sbcglobal.net> wrote:
- quote -

This is the thread that you are referring to in comment #2.
I started this mess.

I guess I need to take a look at the regs to see the exact
definition of like kind property.

I instinctively thought that a truck (a pickup with a weight
greater than 6000lbs and a bed greater than 6') and a
regular luxury auto would be like kind property.

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"KJ Nichols, CPA" <knichols[at]rfoods.com> wrote:

- quote -

A couple of questions/comments:
1) Stuart Bronstein asked if 1031 is a mandatory section.
Yes, it's mandatory, you do not elect to have 1031 treatment
apply, if you meet the facts, it apples. The section begins
"No gain or loss **shall be recognized** on the exchange of
property held for productive use in a trade or business or
for investment if ..." (emphasis added around "shall be" ).
However, transactions are generally structured to meet 1031
requirements purposefully, you don't usually "accidentally"
fall into 1031, therefore, it resembles an elective section,
but it is not.

2) There was a similar post a couple of weeks ago about
trading a luxury auto for a heavy truck. To my way of
thinking, this is not a like-kind exchange and therefore,
you're by definition outside of 1031, therefore, you're not
bound to carry over basis and/or depreciation method.


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If the old vehicle was traded-in for the new vehicle, then
yes 1031 automatically applies. Unless the $16,000
remaining basis can be recharacterized as non luxury (which
i think it can't), then you are right it should be subject
to the 5 yr luxury cap of $1,775. It definitly should not
start over from year 1.

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"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:
- quote -

Ok.

Luxury car (let's say has NBV of $16,000 at time of trade
and was owned for more than 5 years) was traded for pickup
truck (weight more than 6,000lbs and bed greater than 6'
long - i.e. no luxury limitation or 179 expense limitation
). Let's also say $30,000 cash was given up along with the
luxury car for the pickup truck. So we now have a truck
with a $46,000 basis. I know I can take $30,000 of section
179 expense on the boot - I have no issue with the boot. My
problem is what to do with the old basis of $16,000. As I
was saying before, I believe for the relenquished portion of
the replacement vehicle, the $16,000, should still have the
luxury limits apply. The software I am using is starting
with the luxury limits for year one ($2,960 I believe) in
the year of exchange. Additionally, when running the
subsequent year's depreciation report, the depreciation on
the $16,000 is $4,900 (i.e. second year luxury limitation)
However, I think the depreciation should be something like
$1,775 (luxury limitation for a vehicle in its 5th thru
infinity year) since the luxury auto was given up in year 5.

Thanks.

Josh

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Actually section 1031 applies to more than real estate.
Under the statute it applies to "property held for
productive use in a trade or business or for investment...."

In fact, section 1031(h) is titled, Special rules for
foreign real and personal property.

My question is whether section 1031 is mandatory?

Stu

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JMc wrote:

- quote -

Yes. First of all, erase that "1031" from memory; doesn't
apply to this kind of exchange. (real estate)

Now, you were using "luxury" car in business and
depreciating it? fine. And you exchanged it for a "common
old pickup truck"? (red?) Was it an even trade? Or did you
receive any difference in cash? I think we need just a tad
more information.

ChEAr$,
Harlan Lunsford, EA n LA
Thurs 16 Feb 2006

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It appears my first post didn't go through, so I'll attempt
it again:

I hate when I begin to trust software over regulations....

I've read, and hopefully uderstood for the most part, the
temporary regs released in Feb 2004 covering depreciation
for like kind exchanges.

The thing that I am having trouble with is when a luxury
auto is exchanged for another auto (in my case it is for a
non-luxury truck) and you are to continue depreciating the
"exchanged asset" like it was never exchanged. The
depreciation software I am using continues depreciating the
exchanged luxury auto, but is reporting the first year limit
of $2,960 in the year of exchange. The luxury auto was in
its 5th year, so I'm thinking the depreciation for the
exchanged luxury auto should be $1,775 instead.

Any thoughts?

Thanks

Josh

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