Which of the following statements about nontaxable exchanges is true?
A) The parties to the exchange agree that the properties exchanged are of equal value.
B) The parties to the exchange both realize gain on the exchange.
C) No cash can change hands in a nontaxable exchange.
D) Any gain realized on the exchange is not included in financial statement income.

Question

Quizplus · Accepted Answer

In a nontaxable exchange, the parties agree that the properties exchanged are of equal value. This is known as the "like-kind" requirement, meaning that the exchanged properties must be similar in nature or character, even if they have different tangible qualities or uses. This requirement is essential for the exchange to qualify as nontaxable under the Internal Revenue Code.

Which of the Following Statements About Nontaxable Exchanges Is True