On June 10, 2018, Ebon, Inc. acquired an office building as a result of a like-kind exchange. Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange. Which of the statements below is correct?
A) The holding period of the factory building includes the holding period of the office building.
B) The holding period of the office building starts on June 11, 2018.
C) The holding period of the office building starts on June 10, 2018.
D) The holding period of the office building includes the holding period of the factory building.
E) None of the above.

Question

Quizplus · Accepted Answer

According to the tax rules for like-kind exchanges, the holding period of the property received in the exchange includes the holding period of the property given up. Therefore, the holding period of the factory building is added to the holding period of the office building. Option D correctly reflects this rule, and is therefore the correct answer. Option A is incorrect because it implies that only the factory building's holding period matters. Option B is incorrect because the holding period starts on the day of acquisition, which was June 10, 2018. Option C is also incorrect for the same reason as option B. Option E is incorrect because one of the other options is correct.