The Treasury Department and the Internal Revenue Service have published a new revenue procedure that offers guidance on the like-kind exchange of a home.

The revenue procedure clarifies that a homeowner who may exclude gain upon a sale or exchange of a home also may benefit from a deferral of gain for a like-kind exchange with respect to the same property. 

Generally, a homeowner may exclude up to $250,000 ($500,000 for certain joint returns) of gain upon the sale or exchange of a home.  The homeowner must have owned and used the property as her principal residence, for periods aggregating two years or more, during the five-year period ending on the date of the sale or exchange, and must not have used the exclusion during the two-year period ending on that date.  The home-sale exclusion may apply to a home office, or other business portion of a home, but not to depreciation from the business use.

In the case of business property, a property owner generally would not recognize gain upon the exchange of the business property for replacement property of a like kind.  The property owner would recognize gain to the extent received in cash or property that is not of a like kind (commonly called boot).  Property used solely as a home would not constitute business property.

The revenue procedure indicates that, in certain cases, a homeowner may benefit from both the home-sale exclusion and the like-kind deferral.  In such cases, the property would have been used consecutively or concurrently as a home and a business (e.g., a rental residence). 

A copy of the revenue procedure is available at

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