Luce Company exchanged investment land for a building to be used in its business. Luce's gain on the exchange was nontaxable (because the assets were like-kind) but was included in financial statement income. Which of the following statements is false?

Question

Quizplus · Accepted Answer

In a like-kind exchange that is nontaxable, for tax purposes, the basis of the new asset (building) is the same as the basis of the old asset (land) surrendered, making statement B true. Statement A is false in a tax context because the book basis for financial reporting purposes is indeed the fair market value (FMV) of the building received, but it's presented as a true statement in the context of financial accounting. Statement C is true because the difference in tax basis (carrying over from the land) and book basis (FMV of the building) will lead to different depreciation calculations for tax and financial reporting purposes. However, the question asks for the false statement, and since all provided statements are accurate in their respective contexts (with the clarification that A refers to financial accounting), the correct answer is that none of these statements are false.

Luce Company Exchanged Investment Land for a Building to Be