Like-Kind Exchange

See: Like-For-Like Sales.

Just a place where you can find your kind of people. For you, the local leather bar might be your like-kind exchange. Or maybe you find your like-kind exchange under the highway overpass at midnight on Saturday nights. Or at the rat-fighting pits. We're not here to judge.

Actually, though, a like-kind exchange is a stipulation in U.S. tax law. It describes what to do with transactions where an asset is exchanged for another similar asset.

You and your neighbor just trade houses. That situation would define a like-kind exchange. One asset flipped for another, similar asset.

Usually, the series of transactions is more complicated. You sell your house. Then, a few months later, you buy a new new house with the cash you earned from the initial sale.

The tax-law implication comes in because you don't want to have to pay taxes on that first sale. If you sell a house for $500,000 and then buy another house for $510,000, you don't want to face down a $100,000 tax bill for essentially moving across the street.

These situations are also known as 1031 exchanges.