For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Question

Quizplus · Accepted Answer

This statement is true. Realized gain in a like-kind exchange is deferred if the exchange is solely for like-kind property, which generally means property that is of the same nature or character, even if they differ in grade or quality. The idea behind a like-kind exchange is to allow taxpayers to defer recognition of the gain on the property they give up in the exchange, which can help them avoid or reduce taxes. However, if the taxpayer receives cash, boot (property that is not like-kind), or relief from debt as part of the exchange, then there may be some recognized gain or loss.

For a Like-Kind Exchange, Realized Gain Is Deferred If the Exchange