IRS Releases Favorable Ruling on Like Kind Exchange Programs

The Internal Revenue Service (IRS) has released a favorable private letter ruling related to a common tax strategy referred to as a Like Kind Exchange (LKE) program, according to WTP Exchange. The ruling was requested by, and issued to WTP Exchange, an affiliate company of WTP Advisors, a global tax and business advisory firm.

The new IRS ruling (201308020) makes it clear that WTP Exchange is permitted under the tax law to provide both LKE software and qualified intermediary services. “The IRS ruling provides companies with a level of certainty in an uncertain world,” said Ron Hodgeman, tax attorney and partner at WTP Exchange.

Companies are very cautious about implementing tax strategies. An unproven or poorly designed LKE program solution can lead to IRS audits and the assessment of penalties and interest.

“Even though tax-deferred exchanges have been a part of our tax law for over 90 years, we decided to obtain an IRS ruling around our solution to help put our clients at ease,” Hodgeman said.

Under Internal Revenue Code section 1031, no gain or loss is recognized when companies sell business or investment property and acquire property that is like-kind. A transaction that is structured as a tax-deferred exchange is generally referred to as a “like-kind exchange” or an “LKE."

Equipment dealers, car rental companies, and other organizations that routinely dispose of business assets can realize substantial benefits from an ongoing program of exchanges (referred to as an LKE Program).

WTP Exchange is the only firm in the world to offer a fully-integrated LKE program solution, according to the company.  In addition to its software, which was built on more than 25 years of LKE program experience, WTP Exchange provides LKE tax consulting services, and Qualified Intermediary (QI) services.

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