Part of the tax Code. Although one utility company reported that “our company accountants have determined that a like-kind exchange violates standard accounting principles and is not legal to do,”
But wait…there’s more! Having met the “qualifying” and “like-kind” tests, additional rules apply:
Restricted Sale Proceeds. Another requirement is that the sale proceeds be restricted until they are used to purchase the new unit or pay down equipment-related debt. SUMMARY. Like-kind exchanges can provide a significant benefit in deferring capital gains if used properly. The requirements— although not burdensome—are fairly strict. Make an effort to understand the qualifications and be wary of any transaction in which a qualified intermediary is not part of the process. The details should be reviewed carefully with the Finance Department to make certain that you are gaining the tax advantage this type of exchange allows.