Question

Which of the following statements with respect to a like-kind exchange is false?

A) Personal property must be exchanged for personal property.
B) An exchange of inventory does not qualify as a like-kind exchange.
C) Property of one class must be exchanged for property of the same class.
D) Sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange.

Answer 1

In a like-kind exchange, property of one class must be exchanged for property of the same class, but the sale of property and subsequent purchase of like-kind property does not always qualify as a like-kind exchange.

Step-by-step explanation:

The false statement with respect to a like-kind exchange is option D) Sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange.

In a like-kind exchange, property of one class must be exchanged for property of the same class, which means personal property must be exchanged for personal property, real property for real property, etc. (option A is true). However, an exchange of inventory does not qualify as a like-kind exchange (option B is true). Finally, option C, which states that property of one class must be exchanged for property of the same class, is also true. Option D, on the other hand, is false because there are certain requirements and rules that need to be met for an exchange to qualify as like-kind, such as the use of a qualified intermediary and strict identification and timing rules.