Many companies have been able to reduce
their tax liability over the past few years by taking advantage of
Bonus Depreciation. However, the benefits of Bonus Depreciation will
ultimately reverse through higher tax gains on the disposition of
your assets. Through the implementation of a Like Kind Exchange (LKE) program, it is possible to
defer the recognition of
that gain as long as you continue to replace disposed assets.
With recent IRS guidance and advances in technology, many leaders in the rental and leasing
industry as well as other businesses have started using this strategy to provide competitive advantages including:
- Significantly lower borrowing
costs/interest expense by funding new purchases with the full
proceeds from dispositions vs.the tax reduced proceeds without
- Deferred tax payments on the sale
of business assets for as long as you continue to replace those
assets which (usually for as long as you remain in business) which
provide significantantly enhanced cash flows and time value (NPV)
The tax law behind Like Kind Exchange
was introduced in the 1936 Tax Code but has historically been
utilized mostly for real estate transactions or large ticket items
such as aircraft. Generally, Like Kind Exchange has not been used
for business assets because of the need to route funds to a
Qualified Intermediary (QI) and prohibitive administrative costs.
PwC has introduced Internet technology that can automate an LKE
program for business assets with minimal impact to operations and no
changes to your purchasing or remarketing process. In addition, the
technology has significantly reduced the administrative costs and
fees associated with the QI.
An LKE program provides the
opportunity to finance new property with tax savings. Accordingly,
an LKE program can increase the overall profitability of companies
that routinely sell assets used in the course of business.
PricewaterhouseCoopers is a leader in
providing LKE services to a broad range of companies, and offers a
comprehensive approach that addresses the tax compliance, technology
and operational issues inherent in establishing an LKE program.
PwC has a dedicated team of more than
50 tax and technology professionals whose main focus is the delivery
of Like Kind Exchange services to our clients. We would be happy to provide you with additional
information about LKE. We can be reached by calling the PwC LKE
Information Line at 1-877-479-2882 or via e-mail at