A like-kind exchange is just that, an exchange of things that are similar. Some would say that a Volkswagen Beetle and a Jaguar are not similar, but for tax purposes they could both be business vehicles. The like-kind exchange can be a very useful method for deferring gains on depreciated business vehicles.

If you have a business vehicle, you may or may not want to drive it for 200,000 miles until it totally craps out. Assuming you don’t want to do that and every few years you want a new business vehicle, a like-kind exchange might be the way to go. With the bonus depreciation and Section 179 rules, your business vehicle might not have any tax basis remaining if you took depreciation on all of it already. That 4-year old vehicle might be worth $10,000 and if you sell it, you will recognize a gain of $10,000. Read More