Page 106 - Virtual Currencies

12:10 - 7-Feb-2023
Page 15 of 42
Fileid: … tions/p544/2022/a/xml/cycle03/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
harbors against actual and constructive receipt • The qualified indications of ownership of ii. A person who is related to you or
of money and unlike property discussed above, property are transferred to an EAT. your agent under the rules dis-
the agreement must provide that you have no cussed in chapter 2 under Non-
rights to receive, pledge, borrow, or otherwise Written agreement. Under a QEAA, you and deductible Loss, substituting
obtain the benefits of money or unlike property the EAT must enter into a written agreement no “10%” for “50%.”
before the end of the exchange period. How- later than 5 business days after the qualified in- 3. The combined time period the relin-
ever, the agreement can provide you with the dications of ownership (discussed later) are quished property and replacement prop-
following limited sets of rights. transferred to the EAT. The agreement must erty are held in the QEAA cannot be lon-
• If you have not identified replacement provide all of the following. ger than 180 days.
property by the end of the identification pe- • The EAT is holding the property for your
riod, you can have rights to receive, benefit in order to facilitate an exchange Exchange accommodation titleholder
pledge, borrow, or otherwise obtain the under the like-kind exchange rules and (EAT). The EAT must meet all of the following
benefits of the cash or cash equivalent af- Revenue Procedure 2000-37, as modified requirements.
ter the end of the identification period. by Revenue Procedure 2004-51.
• If you have identified replacement prop- • You and the EAT agree to report the ac- • Hold qualified indications of ownership
(defined next) at all times from the date of
erty, you can have rights to receive, quisition, holding, and disposition of the acquisition of the property until the prop-
pledge, borrow, or otherwise obtain the property on your federal income tax returns erty is transferred (as described in (2), ear-
benefits of the cash or cash equivalent in a manner consistent with the agreement. lier).
when or after you receive all the replace- • The EAT will be treated as the beneficial • Be someone other than you or a disquali-
ment property you are entitled to receive owner of the property for all federal income fied person (as defined in 2(b), earlier).
under the exchange agreement. tax purposes. • Be subject to federal income tax. If the
• If you have identified replacement prop- Property can be treated as being held in a EAT is treated as a partnership or S corpo-
erty, you can have rights to receive, QEAA even if the accounting, regulatory, or ration, more than 90% of its interests or
pledge, borrow, or otherwise obtain the state, local, or foreign tax treatment of the ar- stock must be owned by partners or share-
benefits of the cash or cash equivalent on rangement between you and the EAT is differ- holders who are subject to federal income
the occurrence of a contingency that is re- ent from the treatment required by the written tax.
lated to the exchange, provided for in writ- agreement, as discussed above.
ing, and beyond your control or the control Qualified indications of ownership.
of any disqualified person other than the Bona fide intent. When the qualified indi- Qualified indications of ownership are any of
person obligated to transfer the replace- cations of ownership of the property are trans- the following.
ment property. ferred to the EAT, it must be your bona fide in- • Legal title to the property.
tent that the property held by the EAT • Other indications of ownership of the prop-
Like-Kind Exchanges Using represents either replacement property or relin- erty that are treated as beneficial owner-
Qualified Exchange quished property in an exchange intended to ship of the property under principles of
Accommodation Arrangements qualify for nonrecognition of gain (in whole or in commercial law (for example, a contract
for deed).
(QEAAs) part) or loss under the like-kind exchange rules. • Interests in an entity that is disregarded as
Time limits for identifying and transferring an entity separate from its owner for fed-
The like-kind exchange rules do not generally property. Under a QEAA, the following time eral income tax purposes (for example, a
apply to an exchange in which you acquire re- limits for identifying and transferring the prop- single member limited liability company)
placement property (new property) before you erty must be met. and that holds either legal title to the prop-
transfer relinquished property (property you erty or other indications of ownership.
give up). However, if you use a qualified ex- 1. No later than 45 days after the transfer of
change accommodation arrangement (QEAA), qualified indications of ownership of the Other permissible arrangements. Property
the transfer may qualify as a like-kind ex- replacement property to the EAT, you will not fail to be treated as being held in a
change. For details, see Revenue Procedure must identify the relinquished property in a QEAA as a result of certain legal or contractual
2000-37, 2000-40 I.R.B. 308, as modified by manner consistent with the principles for arrangements, regardless of whether the ar-
Revenue Procedure 2004-51, 2004-33 I.R.B. deferred exchanges. See Identification re- rangements contain terms that typically would
294, available at IRS.gov/irb/2004-33_IRB/ quirement, earlier, under Deferred Ex- result from arm's-length bargaining between un-
ar13.html. change. related parties for those arrangements. For a
2. One of the following transfers must take list of those arrangements, see Revenue Proce-
Under a QEAA, either the replacement prop- place no later than 180 days after the dure 2000-37.
erty or the relinquished property is transferred transfer of qualified indications of owner-
to an exchange accommodation titleholder ship of the property to the EAT. Partially Nontaxable Exchanges
(EAT), discussed later, who is treated as the a. The replacement property is transfer-
beneficial owner of the property. However, for red to you (either directly or indirectly If, in addition to like-kind property, you receive
transfers of qualified indications of ownership through a qualified intermediary, de- money or unlike property in an exchange of
(defined later), the replacement property held in fined earlier under Qualified interme- like-kind property on which you realize a gain,
a QEAA may not be treated as property re- diary). you may have a partially nontaxable exchange.
ceived in an exchange if you previously owned If you realize a gain on the exchange, you must
it within 180 days of its transfer to the EAT. If b. The relinquished property is transfer- recognize the gain you realize (see Amount rec-
the property is held in a QEAA, the IRS will ac- red to a person other than you or a ognized, earlier) to the extent of the money and
cept the qualification of property as either re- disqualified person. A disqualified the fair market value of the unlike property you
placement property or relinquished property person is either of the following. receive in the exchange. If you realize a loss on
and the treatment of an EAT as the beneficial i. Your agent at the time of the the exchange, no loss is recognized. However,
owner of the property for federal income tax transaction. This includes a per- see Unlike property given up, later.
purposes. son who has been your em-
The recognized (taxable) gain on the dispo-
Requirements for a QEAA. Property is held in ployee, attorney, accountant, in- sition of the like-kind property you give up is the
vestment banker or broker, or
a QEAA only if all of the following requirements smaller of two amounts. The first is the amount
are met. real estate agent or broker within of gain realized. See Gain or Loss From Sales
the 2-year period before the
• You have a written agreement. transfer of the relinquished prop- and Exchanges, earlier. The second is the limit
• The time limits for identifying and transfer- erty. of recognized gain. To figure the limit on recog-
ring the property are met. nized gain, add the money you received and
Chapter 1 Gain or Loss Page 15