Legal Definitions - sale and exchange

Definition: Sale and exchange refer to the voluntary transfer of property for value resulting in a gain or loss recognized for federal tax purposes. It can also refer to a situation where the proceeds of a sale are to be vested in another estate of the same character and use.

Examples:

• When John sold his car to Mary for $10,000, it was considered a sale and exchange for tax purposes.
• When a company sells its old equipment and uses the proceeds to purchase new equipment, it is considered a sale and exchange.

These examples illustrate how a sale and exchange involve the transfer of property for value and can result in a gain or loss for tax purposes. It can also involve the reinvestment of proceeds into similar assets.