The real estate market is in the midst of an extended slump throughout most of the country. That makes it more difficult for investors to buy or sell buildings and other property. To compound matters, a sale could result in significant tax consequences for real estate property that has appreciated in value since it was acquired.

Fortunately, there is a way you may be able to avoid any dire tax problems. Assuming a suitable replacement property can be identified, you can arrange an exchange of properties. As long as the properties are “like-kind,” you generally do not have to pay any current tax on the exchange (but see page 2).

How it works: The rules for like-kind exchanges apply to investment or commercial property. (They cannot be used for personal residences.) This refers to the nature, character or class of the property—not its grade or quality. For example, a swap of an office building for an apartment building of the same value can qualify as a like-kind exchange. As a result, neither party has to report taxable income.

Other types of property may qualify under the rules, but the majority of these transactions involve real estate. However, in the real world, trading real estate properties is usually not so simple.

Case in point: Suppose you want to acquire real estate, but the owner is not interested in any of the properties that you own. The tax law allows you to take the “like-kind exchange” concept one step further. The exchange can involve multiple parties if the two owners cannot agree on the properties to be swapped.

The IRS has approved the use of a qualified intermediary to facilitate the deal, as long as the intermediary is not connected to one of the other parties. Be aware that time restrictions are involved in a multiple-party swap. In general, (1) the property you are receiving must be identified within 45 days of the original transfer and (2) you must take title within 180 days (or your tax return due date plus any extensions, if that is sooner).

Example: Say that Mr. Able wants to acquire property owned by Ms. Baker. However, Able does not own any property that Baker desires in return. After discussing a number of locations, the two of them strike a deal with Mr. Clay. Baker agrees to take Clay’s property, Clay acquires title to a property owned by Able and Able obtains the property he wanted all along.

Assuming like-kind properties are involved, the entire transaction may be tax-free if the deal is completed within the necessary deadlines.

There is, however, one catch: If you receive any money or property as part of the deal, the additional amount—called “boot” in tax lingo—is subject to income tax. On the other hand, no loss is recognized by the taxpayer who provides the boot. The assumption of a greater mortgage is also treated as taxable boot for this purpose.

Finally, be aware that the IRS recently announced that it is on its guard for like-kind exchanges it considers to be abusive in nature. This is a complex area of the tax law, so be sure to consult with a professional tax adviser before you strike a deal.