Section 3: 5–15%R12

Nontaxable Exchanges and Involuntary Conversions

Exam insight

Like-kind exchanges, involuntary conversions, and the home-sale exclusion all defer or exclude gain, but each has exact boot, basis, and timing rules the exam tests closely.

What AICPA wants you to know

1Apply §1031 like-kind exchange rules (real property only post-TCJA)
2Compute recognized gain when boot is received and the resulting substituted basis
3Apply §1033 involuntary conversion deferral and replacement periods
4Apply the §121 personal residence gain exclusion
5Identify related-party and timing restrictions

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Nontaxable ExchangeRealized gain is deferred, not erased: recognize only up to boot, and carry the deferred gain into a substituted basis.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.