I have prepared a few tax returns this year (2010) where the owners of a partnership have taken advantage of the like kind exchange rules to defer recognizing a gain on the sale of real property. This kind of transaction is are also called a “1031 exchange,” because Internal Revenue Code section 1031 of the U.S. Internal Revenue Code allows owners of certain kinds of assets to defer capital gains taxes on any exchange of like-kind properties. Both the relinquished property and the acquired property must be like-kind, and must be held for business or investment purposes. Taxes on capital gains are not charged upon sale of a property if a qualifying replacement property is acquired. The amount of the unrecognized gain reduces your basis in the acquired asset(s) meaning that your gain is not eliminated but deferred to a future tax year.
If you are curious as to how the like kind exchange rules might benefit you, I urge you to contact myself or another tax professional.