The typical multi-party exchange arises when one party (let's call her Ms.Smith) who owns Whiteacre, seeks to exchange it for Blackacre, owned by Ms.Garcia. Ms.Garcia, however, wants to sell Blackacre rather than exchange it for other realty. A third party, Mr.Wu, wants to buy Whiteacre, but if Ms.Smith simply sells it to him, she'll have to recognize her gain on the sale. The transaction can be arranged as follows:
Mr.Wu buys Blackacre from Ms.Garcia. Mr.Wu then exchanges it with Ms.Smith for Whiteacre. Ms.Smith should not have to recognize any gain on the sale under the like-kind exchange rules. If Whiteacre is worth more than Blackacre, Mr.Wu will have to pay extra consideration in the exchange. If the extra consideration is cash (or other non-like- kind property), Ms.Smith will have to recognize her gain up to the amount of extra consideration received.
Alternatively, Ms.Smith could have first directly exchanged Whiteacre for Blackacre with Ms.Garcia. Ms.Garcia could then sell Whiteacre to Mr.Wu. Again, Ms.Smith would be able to avoid tax on her gain on Whiteacre under the like-kind exchange rules.
The important conclusion to draw from the above example is that you may be able to accomplish a like-kind exchange without having to find an owner of property willing to trade with you directly. If you can more simply find (1) a buyer for your property and (2) property for sale that you seek to acquire, you should be able to structure a like-kind exchange as in the above example.
Please contact us if you would like more information on how the like-kind exchange rules work in specific situations.