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USA, Say user X on this list has $700,000 worth of bc, paid $100,000.

Let's say otherwise X has no assets and only minimal income.

If X sells it today for USD, of course pays cap gains on the $600,000. (Actually how much is that?)

Let us say X wants to do this:

  1. Sell the bc, USD700k

  2. Buy for cash a property (say, a rented commercial property - a local chinese food takeout) with all the cash, so $700,000

  3. Keep, obviously, the shop for some time (say 20 yrs) collecting the rent, paying for repairs, land tax etc.

  4. For example, it is ultimately sold for $5m in the far future, would at that time pay cap gains on (5m - 0.7m = 4.3m)

However.

Of course in point 2 it wouldn't be 700k, it would be what is left over after today's capital gains tax on the bc sale.

Is there any "fiddle" where you can do something like ...

  • I have (made a note on it a few years ago, just assert I have, whatever) a "business" where I trade things like bitcoin and takeout food rental properties

  • As you can see I happen to be swapping from some bc to a property today

  • Thus at point 2 I do have 700k to spend. In the far future the cap gains would be on (5m - 0.1) and there'd be no cap gains at the moment.

Is there a way you can do that?

Also: can a corporation do this? (So in the example, X is a company from the get go, not a person on the net!)

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  • No. The current 1031 exchange rule is focused on rental property, not a gain from b**coin or even stocks.
    – JTP - Apologise to Monica ♦
    Commented Feb 4, 2021 at 16:19
  • @JTP-ApologisetoMonica don't answer in the comments!!!!!
    – RonJohn
    Commented Feb 4, 2021 at 16:21
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    You should flag it. As a mod, I'd have an obligation to respond to you, and delete it. OP should know better. Really.
    – JTP - Apologise to Monica ♦
    Commented Feb 4, 2021 at 16:23

2 Answers 2

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Everything I've seen regarding asset swaps to avoid CG relates to selling real estate and then "quickly" buying another piece of real estate. As JTP mentioned, Rule 1031.

Even swapping an amount of money in an ETF for an equivalent amount shares in an associated mutual fund (for example, converting $100,000 of VIG to $100,000 of VDADX) cannot be done; you must sell the VIG, pay the CG, and then buy VDADX with the remaining money).

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  • intriguing, thanks guys. I wonder if any difference if it is a corporation ??
    – Fattie
    Commented Feb 4, 2021 at 16:30
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No easy way to do this usually, are some tax jurisdictions where certain classes of swaps are allowed (see https://www.taxinsider.co.uk/swapping-or-gifting-interests-in-property-cgt-issues-ta for example, or primary residences being CGT exempt in certain places), but basically none that would allow sale to cash first then repurchase of a different asset class etc.

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  • Right. Even a real estate 1031 exchange has a short period of cash somewhere, but ends in "like kind" exchange.
    – JTP - Apologise to Monica ♦
    Commented Feb 4, 2021 at 16:25
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    Is the link in this example relevant to a question tagged united-states?
    – RonJohn
    Commented Feb 4, 2021 at 16:29
  • No, although did add 'are some tax jurisdictions' to make this clear that there can be some fringe nuance to this depending on asset class and place, ala JTP's comments on 1031 exchange and the fact the question veers off into what if territory where broader context might be helpful to the OP. As stated, no way to do this specific sequence(s) in the USA as far as I'm aware.
    – Philip
    Commented Feb 4, 2021 at 16:36

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