Intangibles Can Qualify as Like Kind Property for Section 1031 Exchanges

A new Chief Counsel Advice (CCA 200911006) declares that intangibles such as trademarks, tradenames, mastheads, etc., that can be valued separately and apart from goodwill qualify as like-kind property for a Section 1031 exchange.

This is a policy change from past thinking of the IRS as expressed in PLR 200602034 - issued as a Technical Advice Memorandum - which said that such intangibles could not be of like kind to similar intangibles of any other business because they were closely related to, and part of, the goodwill of the business being sold. Goodwill of a business being sold is not considered to be like kind to the goodwill of any other business being purchased.. The CCA also reverses IRS’s position in FAA 20074401F, which stated that newspaper mastheads and customer-based intangibles were too closely related to goodwill to ever be like-kind.

The CCA declares that the IRS should not follow the position set forth in PLR 200602034. The IRS says that except in rare and unusual situations, intangibles such as trademarks, tradenames, mastheads, etc. can be valued separately from the goodwill of a business and thus are eligible for an exchange for like-kind intangible property.

If you have questions about intangibles and whether they may qualify for a section 1031 exchange, please give us a no obligation, toll free call at 888-367-1031.