Like-kind exchange

August 25, 2006

The IRS says that you can exchange property of a similar type with another person and avoid paying taxes on it. In fact, transactions can include 3 or 4 people (maybe more?). Transactions can be partial, where one pays the difference in value between items with cash. Transaction can involve multiple items, too. The problem is it’s very difficult to locate another interested party. These like-kind exchanges are generally handled by bankers for wealthy clients. Enter the interweb: dis-intermediate the middleman. One could build a website that helps 2 or more people meet to exchange like-kind items and meet the IRS requirements for a tax-free transaction. Of course, this is not a site geared towards bored office workers; instead, it would be aimed at small businesses and real-estate investors. For example, contractors can trade used trucks. Restaurants can trade kitchen equipment. Computer companies can trade cubicle walls and desks. People can trade rental property. Unlike most web ideas, this one would be a real business: charge a listing fee and/or transaction fee, plus more for optional services. The site can serve as a middleman that holds property for someone so they can perform a delayed like-kind transaction. I think this is another profitable niche that can be replaced by a web site. If someone implements this idea, could I get a free t-shirt?


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