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The Like-Kind Exchange Equity Conundrum

Bradley T. Borden

Brooklyn Law School

Florida Law Review, Vol. 60, p. 643, 2008

The tax-free treatment of like-kind exchanges presents one of tax law's most compelling equity conundrums. Tax law generally does not tax property holders on the appreciation in the property's value, but it does tax gain or loss recognized by property sellers and exchangers of non-like-kind property. In its basic Aristotelian form, equity requires that likes be treated alike, but it does not provide criteria for determining what is alike. Depending upon the criteria selected, exchangers of like-kind property can be similar to holders, or similar to sellers and exchangers of non-like-kind property. The equity conundrum is whether tax law should treat exchangers of like-kind property the same as holders of property or the same as sellers and exchangers of non-like-kind property. This Article solves the conundrum using Rawlsian and Hohfeldian concepts, which suggest that holders should not be taxed on property's appreciation. Second, it explains that once law exempts holders' appreciation from taxation, comparative equity dictates that it should also exempt from taxation exchanges of like-kind property.

Number of Pages in PDF File: 54

Keywords: Equity, Equality, Section 1031, Like-Kind Exchange, Tax-Free Exchange, Like-Kind Property

JEL Classification: A10, D00, D63, H20, H24, K00, K34

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Date posted: August 10, 2007 ; Last revised: May 15, 2008

Suggested Citation

Borden, Bradley T., The Like-Kind Exchange Equity Conundrum. Florida Law Review, Vol. 60, p. 643, 2008. Available at SSRN: https://ssrn.com/abstract=1005384

Contact Information

Bradley T. Borden (Contact Author)
Brooklyn Law School ( email )
250 Joralemon Street
Brooklyn, NY 11201
United States

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