Sale or Exchange Law and Legal Definition

Sale or exchange ia a term used in tax law to refer to a transaction in which value is received, triggering a gain or loss for income tax purposes. A sale or exchange is distinguished from inheritance, gifts, or other transactions in property which do not result in a calculable gain or loss.

There are some exceptions to triggering a gain or loss for income tax purposes. For example, if you sell or exchange your home, you may be able to exclude up to $250,000 ($500,000 for certain married persons filing a joint return) of the gain on the sale or exchange if you meet the ownership and use tests. Other tax code provisions exist for deferring a gain or loss in a sale or exchange of property.