Final answer:
The false statement about like-kind exchanges is that a sale and subsequent purchase always qualify as a like-kind exchange. In reality, the properties must be directly swapped to defer capital gains tax and must be for business or investment purposes.
Step-by-step explanation:
The statement with respect to a like-kind exchange that is false is: "A sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange." For a transaction to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code, the exchange must involve two properties being swapped directly with each other. Simply selling one property and then purchasing another does not meet the strict definition of a like-kind exchange.
Like-kind exchanges indeed allow for the deferral of capital gains tax, provided the rules are adhered to. The properties exchanged must be "like-kind," meaning they must be of the same nature or character, although they don't need to be of the same grade or quality. Lastly, the exchange must be done for investment or business purposes; personal property does not qualify for a like-kind exchange.