Tax research

You work as a tax professional and one of your best clients, Owen Wilson, has called you to receive some advice. Owen owns and operates his own farmin” rel=”nofollow”>ing busin” rel=”nofollow”>iness and his brother, Luke, owns and operates his own cattle company. Owen and Luke have been talkin” rel=”nofollow”>ing and Luke would like to buy some of Owen’s hay fields for his cattle. Owen wanted to know how much gain” rel=”nofollow”>in that would create and what the tax consequences would be. You vaguely remember somethin” rel=”nofollow”>ing called a like-kin” rel=”nofollow”>ind exchange and discuss with Owen the possibility that there would not be any immediate tax consequences if the transaction meets like-kin” rel=”nofollow”>ind exchange rules. You discuss potential property that could be exchanged and have the followin” rel=”nofollow”>ing scenarios: 1. Owen mentions that Luke owns a tractor and a storage buildin” rel=”nofollow”>ing that he doesn’t use much but Owen would be able to use for his farm. Owen is unsure if Luke would be willin” rel=”nofollow”>ing to give up this property. 2. Owen knows that Luke does have the cash to pay Owen for the hay fields. You mention the possibility of usin” rel=”nofollow”>ing an escrow agent (qualified in” rel=”nofollow”>intermediary) to receive the cash from Luke and fin” rel=”nofollow”>ind qualifyin” rel=”nofollow”>ing like-kin” rel=”nofollow”>ind property for Owen. You tell Owen that you will have to do a little research and get back to him on how to properly handle this transaction to achieve a tax-free result because you know there could be issue due to Owen and Luke bein” rel=”nofollow”>ing related. You do a little research and come up with the followin” rel=”nofollow”>ing results:
2. Use the above authorities and what you know of like-kin” rel=”nofollow”>ind exchanges to write Owen a letter in” rel=”nofollow”>indicatin” rel=”nofollow”>ing your conclusion and advice. Be sure to address the followin” rel=”nofollow”>ing issues: a. Will scenario #1 qualify for like-kin” rel=”nofollow”>ind exchange treatment? Why or why not? b. Will scenario #2 qualify for like-kin” rel=”nofollow”>ind exchange treatment? Why or why not? c. Conclude by advisin” rel=”nofollow”>ing Owen on how to structure this transaction to achieve a tax-free result. i. What items need to be considered because Owen and Luke are related?

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