What are the essential requirements for an exchange?
There must be an exchange, a reciprocal transer of relinquished property. There must be an exchange, a reciprocal transfer of relinquished property for replacement property. A sale and a subsequent or simultaneous purchase does not constitute an exchange. Both the relinquished property and the replacement property must be held by the taxpayer for the productive use in trade or business or for investment. Dealer property and personal use property in the hands of the taxpayer does not qualify but it is not material how the property is held by other parties to the exchange. Both the property given and the property received must be like kind. If the requirements for identification and receipt are not met the replacement property will be considered as not being like kind. The ownership of the relinquished property and the ownership of the replacement property must be the same tax reporting entity.
