Luce Company exchanged the copyright on a software application for a copyright on a different software application. Luce's gain on the exchange was nontaxable (because the copyrights were like-kind) but was included in financial statement income. Which of the following statements is false?

Question

Quizplus · Accepted Answer

None of the statements are false, they are all true. Luce Company exchanged similar assets (copyrights) which qualifies as a like-kind exchange under the tax law. Therefore, the gain is nontaxable but still affects financial statement reporting. The book basis of the copyright received is its fair market value, and the tax basis is the same as the basis of the copyright surrendered. Additionally, there will be differences in future amortization deductions for tax and financial reporting purposes.

Luce Company Exchanged the Copyright on a Software Application for a Copyright