How long must the holding period for like-kind exchange property typically carry over?

In the context of a like-kind exchange, the holding period for the property received typically carries over from the original property. This means that the period during which the original property was held by the taxpayer will also apply to the new property acquired through the exchange.

The reasoning behind this principle is rooted in the taxation of gains. A like-kind exchange allows for the deferral of capital gains taxes when investing in similar properties, which means that the tax implications are tied to the investment strategy rather than a specific property transaction. As a result, retaining the original holding period is essential for determining how any future sales or use of the new property might be taxed.

Maintaining this continuity in holding periods helps establish a consistent method of measuring the taxpayer's investment in the property, particularly regarding depreciation calculations and potential future gain or loss recognition. This carryover principle is important for ensuring that taxpayers do not unreasonably benefit from exchanges as a means to avoid taxation indefinitely.