Terry exchanges real estate (acquired on August 25, 2006) held for investment for other real estate to be held for investment on September 1, 2012.None of the realized gain of $10,000 is recognized, and Terry's adjusted basis for the new real estate is a carryover basis of $80,000.Consequently, Terry's holding period for the new real estate begins on August 25, 2006.

Question

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This statement is true based on the rules of like-kind exchanges under Section 1031 of the Internal Revenue Code. When real estate held for investment is exchanged for other real estate held for investment, and none of the realized gain is recognized, the adjusted basis for the new property is a carryover basis from the old property. The holding period for the new property also begins on the same date as the old property, which in this case is August 25, 2006.

Terry Exchanges Real Estate (Acquired on August 25, 2006) Held