Nontaxable exchanges typically cause a temporary difference between book income and taxable income.

Question

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Nontaxable exchanges, such as like-kind exchanges, result in a temporary difference between the book value and tax basis of the assets involved. This difference will eventually be resolved when the assets are sold or otherwise disposed of, but in the short-term it can lead to differences between book income and taxable income.

Nontaxable Exchanges Typically Cause a Temporary Difference Between Book Income