Like-kind exchanges for IRS Notice 2000-4 and Reg. 1.168(i)-6

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Notice 2000-4

On 1/5/00, the IRS issued Notice 2000-4. This notice for a proposed regulation offers guidance on depreciating MACRS property acquired in a like-kind exchange through either a trade or casualty/theft.

In recognition of IRS Notice 2000-4, when you acquire a MACRS asset through a like-kind exchange from 1/2/00 through 2/27/04, the application creates a replacement aggregate asset that summarizes the component assets.

Illustration of like-kind exchange following IRS Notice 2000-4.

Aggregate assets consist of the following items.

After the application creates the aggregate asset, the component asset's Depreciation tab is not available. To view summary information for the aggregate asset, choose Tasks > Display Calculation. To access the Depreciation tab for a component asset, choose Edit > Component, and then choose the component's description from the cascading menu.

For more information on how the aggregate replacement asset is set up, see the Like-kind exchanges tax assumption.

For treatments that follow IRS Notice 2000-4, the cost/basis of a replacement asset includes the original asset's entire cost/basis. If you use the Property Detail report for personal property tax returns and want the cost of replacement assets to be the adjusted basis of the original asset, perform one of the following tasks.

A replacement aggregate asset (which is created through the like-kind exchange of an existing aggregate asset) contains a continuation component asset for each component asset contained in the aggregate asset that is being replaced. There may also be an additional component asset for any boot given up in the like-kind exchange.

Limitations

IRS Notice 2000-4 resulted in the following limitations.

Reg. 1.168(i)-6

On 2/28/04, the IRS issued Temporary Reg. 1.168(i)-6; this regulation became final on 3/1/07. The regulation offers guidance on depreciating MACRS property acquired in a like-kind exchange through either a trade or casualty/theft.

In recognition of Reg. 1.168(i)-6, when you acquire a MACRS asset through a like-kind exchange after 2/27/04 the application creates a replacement aggregate asset that summarizes the component assets.

Illustration of like-kind exchange following Reg. 1.168(i)-6

Aggregate assets consist of the following items.

For treatments that follow Reg. 1.168(i)-6, the cost/basis of a replacement asset includes the exchanged basis of the relinquished asset.

After the application creates the aggregate asset, the component asset's Depreciation tab is not available. To view summary information for the aggregate asset, choose Tasks > Display Calculation. To access the Depreciation tab for a component asset, choose Edit > Component and then choose the component's description from the cascading menu.

For more information on how the aggregate replacement asset is set up, see the Like-kind exchanges tax assumption.

Limitations

Reg. 1.168(i)-6 resulted in the following limitations.

Other information

General

Aggregate assets

Component assets

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