Final answer:
The statement is false as like-kind exchanges can involve deferred transactions where properties are not directly swapped but rather sold and replaced under certain conditions to qualify.
Step-by-step explanation:
The statement that the transaction must involve a direct exchange of property to qualify as a like-kind exchange is false. Like-kind exchanges, as defined in Section 1031 of the Internal Revenue Code, do allow for some flexibility. Such transactions do not necessarily require a direct swap of properties. Instead, they can be structured in such a way that one property is sold and the proceeds are used to buy another like-kind property within a certain time frame, without immediate tax consequence, provided that specific requirements are met. For example, the property must be held for productive use in a trade or business or for investment, and the replacement property must be identified within 45 days and received within 180 days after the sale of the exchanged property.