The Internal Revenue Service is reminding taxpayers Monday about a change under the new tax law that limits like-kind exchanges to exchanges of real estate and similar property.

Under last December’s tax overhaul, starting Jan. 1, 2018, any exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents and other intellectual property generally won’t qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock will still be eligible.

Like-kind exchange treatment will now apply solely to exchanges of real property held for use in a trade or business or for investment. That means real estate, including land and generally anything built on or attached to the land. An exchange of real property held primarily for sale still doesn’t qualify as a like-kind exchange.

The Tax Cuts and Jobs Act includes a transition rule permitting like-kind treatment for some exchanges of personal or intangible property. If the taxpayer disposed of the personal or intangible property on or before Dec. 31, 2017, or received replacement property on or before that date, the exchange can qualify for like-kind exchange treatment.

Properties can qualify for like-kind exchange treatment if they’re of the same nature or character, even if they vary in quality. Improved real property is typically of like-kind vis a vis unimproved real property. For instance, an apartment building would usually be of like-kind to unimproved land. However, real property within the U.S. is not of like-kind to real property outside the U.S.

To report a like-kind exchange, taxpayers need to file Form 8824, Like-Kind Exchanges, with their tax return for the year property is transferred as part of a like-kind exchange. The form assists a taxpayer in calculating the amount of gain deferred as a result of the like-kind exchange, along with the basis of the like-kind property received, if cash or property that isn’t of like kind is involved in the exchange. Form 8824 helps figure the amount of gain a taxpayer needs to report.