Question

Which of the following statements about nontaxable exchanges is true? Multiple Choice

A. The parties to the exchange both realize gain on the exchange.
B. Any gain realized on the exchange is not included in financial statement income.
C. The parties to the exchange agree that the properties exchanged are of equal value.
D .No cash can change hands in a nontaxable exchange.

Answer 1

The correct option is C.

Step-by-step explanation:

Non- taxable exchange is an exchange where an individual is not taxed on any gain or profit and will not allowed to deduct or subtract any loss. If an individual in a non - taxable exchange, receive property then the basis is same as the basis of the property which is transferred.

So, the statement which is true is that both the parties of the exchange need to agree that the properties which are exchanged should be of equal value.