IRS Releases Favorable Ruling on LKE Programs

Feb 25, 2013, 10:26 ET from WTP Advisors

NEW YORK, Feb. 25, 2013 /PRNewswire/ -- The Internal Revenue Service (IRS) has released a favorable private letter ruling related to a common tax strategy referred to as a Like Kind Exchange (LKE) program.  The ruling was requested by, and issued to, WTP Exchange, an affiliate company of WTP Advisors, a global tax and business advisory firm.  The new IRS ruling (201308020) makes it clear that WTP Exchange is permitted under the tax law to provide both LKE software and qualified intermediary services. 

"The IRS ruling provides companies with a level of certainty in an uncertain world," says Ron Hodgeman, tax attorney and partner at WTP Exchange.

Companies are very cautious about implementing tax strategies.  An unproven or poorly designed LKE program solution can lead to IRS audits and the assessment of penalties and interest.

"Even though tax-deferred exchanges have been a part of our tax law for over 90 years, we decided to obtain an IRS ruling around our solution to help put our clients at ease," says Hodgeman.

Under Internal Revenue Code section 1031, no gain or loss is recognized when companies sell business or investment property and acquire property that is like-kind.  A transaction that is structured as a tax-deferred exchange is generally referred to as a "like-kind exchange" or an "LKE".  Equipment dealers, car rental companies, and other organizations that routinely dispose of business assets can realize substantial benefits from an ongoing program of exchanges (referred to as an LKE Program).

"As the economy continues to struggle, our clients are interested in strategies that can help them increase cash flow and improve their profitability.  An LKE Program is one of the few proven tax solutions that can be relied on during these uncertain times, and the WTP Exchange fully-integrated solution provides benefits that can't be matched by our competition," says Hodgeman.

WTP Exchange is the only firm in the world to offer a fully-integrated LKE program solution.  In addition to its world-class software, which was built on more than 25 years of LKE program experience, WTP Exchange provides LKE tax consulting services, and Qualified Intermediary (QI) services.

Since 2008, companies have reduced their current tax liability by taking advantage of an economic stimulus provision called "bonus depreciation."  As bonus depreciation is phased out later this year, many unsuspecting companies will face skyrocketing tax bills.  An LKE program can help these companies to avoid these higher taxes.

About IRS Private Letter Rulings

According to the Tax Almanac, a private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer's specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of a particular transaction.

WTP Advisors is a leader in tax and business advisory services for a global marketplace. Our highly skilled professionals equipped with years of industry experience, coupled with our cutting-edge technologies, make substantive and long-term differences to an organization's profitability. WTP Advisors is headquartered in White Plains, NY, with offices across the Americas, Asia and Europe.