The like kind exchange (LKE) provisions under IRC Sec. 1031 allow companies to defer the recognition of taxable gains by exchanging relinquished (sold) business assets with new, similar assets. An LKE may help to defer gains from the sale of:
- Trade or business property, such as: automobiles, heavy equipment, trucks, jets, railcars, manufacturing equipment
- Real property used in business such as land, office buildings, warehouses, manufacturing facilities, R&D facilities
- Real property held for investment
- Intangibles, such as patents and copyrights
As tax professionals with over 10 years of like kind exchange experience, PwC offers a comprehensive approach that addresses the tax compliance, technology and operational issues inherent in establishing an LKE program. This helps to reduce friction between your long-term tax strategy for 1031 deferrals and the ability of the technology to meet the IRS' requirements for your LKE program.
"We conducted an extensive RFP process and spent considerable time with several potential providers and consulted their references. Ultimately, the outstanding tax technical expertise in LKE and extensive practical experience with large automotive fleet LKE programs were the deciding factors in selecting PwC. This was a significant undertaking for us and it was important to have someone with extensive, real-world experience. They brought a real "can-do" attitude and offered practical solutions to implementing LKE in our business." — Jim Ryan, Dollar Thrifty Automotive Group, Inc.
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Like kind exchanges are critical for companies with a significant number of assets that:
- Are used in their trade or business
- Are disposed of at a taxable gain
- Are replaced periodically with in-kind assets
Examples of companies that might benefit from PwC-eLKE include:
- Dealers and lessors of heavy equipment used for construction, agriculture, mining, trucking and transportation
- Lessors of smaller equipment, furniture, hospital and potentially, large computer equipment
- Small auto leasing companies
- Transportation companies
- Construction companies with significant investments in machinery and equipment
- Trucking companies that own large fleets
- Airlines and utilities that maintain repair, service and maintenance vehicles
- Companies that maintain fleets of vehicles for employee use
- Oil and gas companies replacing their drilling equipment
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PwC-eLKE combines the tax expertise of PwC with a technology solution that automates the administrative processes needed to satisfy the stringent IRS LKE requirements.
PwC-eLKE is a web-based solution designed to accept periodic information feeds from the client's system. Companies use the web interface to upload extract files containing data relevant to asset dispositions and acquisitions; processing takes place at our Dallas-based eBusiness Center processing facility.
The LKE system automates the matching process using matching algorithms that provide for gain deferral utilizing multiple asset matching and a "deferred gain trigger" combined with an analysis of oldest eligible property. PwC-eLKE then generates reports to satisfy IRS reporting and compliance requirements; these are available through the web interface.
PwC has developed a flexible structure for eLKE to accommodate a variety of client concerns. We have customized eLKE to meet client requests, such as the ability to use equipment sales proceeds to pay down credit arrangements or purchase new property, an approach can significantly reduce the funds held by the QI; and providing methods for determining if property will be sold as inventory or rented at the time it is acquired.
To tour the system, please call us at +1 (877) 479 2882 to receive a username and password.
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Experience
PwC has a dedicated LKE practice with more than 45 dedicated tax and technology professionals. Our PwC-eLKE solution benefits from the best practices of our many implementations. Through our experience in managing over six million LKE transactions monthly, we have gained unmatched expertise in identifying and solving the unique issues that may arise. The goal of the PwC-eLKE team is to make the implementation process smooth and efficient.
Updates are provided as part of our maintenance agreement with our clients. If a tax law change occurs, our clients receive the system and functionality upgrades that satisfy the tax law changes, including extensive testing by PwC tax professionals to help ensure smooth implementation of the upgrades.
PwC will issue a tax opinion for the LKE program regarding its compliance with current tax rules and IRS guidance and can provide assistance in the event of an audit by taxing authorities.
PwC's highly trained tax and technology implementation staff work on site to oversee program implementation in a manner consistent with your business needs and in compliance with tax safe harbors. We will work with you or your outside accountant to help ensure that the system configuration supports prior year tax positions and elections.
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