But can you find someone who has land you want who will take your old building? You don't have to. Get other people involved. And the exchange need not be simultaneous, but you must identify the property and transfer title within certain time limits.

Suppose Smith wants to buy your land, and you want to buy an apartment building from Jones. The solution: All three of you get involved in the same transaction. Here's how it works:

• You transfer land to Smith.
  
• Smith pays Jones instead of you.
  
• Jones transfers apartment building to you.
  

If one party is reluctant to participate, hire an intermediary to facilitate the transfers.

A tax-free exchange gives you a tax deferral. You get more than a deferral, however, if you continue holding the acquired property or exchanging it tax-free throughout your life. Then, all the appreciation escapes income taxes. The person inheriting the property receives it with a new cost basis - generally market value at the date of your death.

But there's more to qualifying:

• Both the asset you transfer and receive must be held for investment or for productive use in a trade or business. They can be business real estate, artwork held for investment, rental property. Stocks, bonds, notes, a partnership interest, inventory don't qualify.
  
• Both the asset you transfer and receive must be similar in nature or character - whatever that means. Cases say these are similar in nature or character: rental property for vacant land, because both are real estate, equipment for equipment and a painting for a painting.
  

Consult a tax professional to see if your plan qualifies and for more details like these: The transaction might result in some gain if you receive part cash or nonqualifying assets or your property has a mortgage on it.

Farmers Carroll and Opal Nixon found out how a planned exchange can become a sale instead. The Conservation Commission of Missouri offered to buy part of their Kahoka, Mo., farm for $339,900, but they wouldn't sell. Instead, they suggested a trade of their land for other farmland.

The Nixons wanted their neighbor's property and started negotiations to get it. The plan: Carroll and Opal would transfer their land to the neighbor, who in turn would transfer his land to them. Their neighbor would then transfer the couple's land to the Commission for cash.

But before they completed the negotiations, the Commission, eager to buy the land, gave the Nixons a check. They didn't deposit it but put it into the "deep freeze," which they used for storing food and protecting documents against fire.

After completing the negotiations, the Nixons gave the cool check to their neighbors and received title to the land.

The IRS said this was a taxable sale of the Nixons' land followed by a purchase of the neighbor's land.

The Nixons protested in court saying it was an exchange.

But the judge agreed with the IRS. It was a sale - not an exchange - because the Nixons received the check. "Placing the check in the deep freeze may have shielded it from fire, but it did not shield it from the Nixons' ability to cash it and use the money."