Question

For the scenario described (e. None of these choices are correct), which of the following statements is correct regarding like-kind exchanges?

A) Like-kind exchanges apply only to personal property.
B) Like-kind exchanges apply only to real property.
C) Like-kind exchanges apply to both personal and real property.
D) Like-kind exchanges are no longer allowed under TCJA of 2017.

Answer 1

The correct statement regarding like-kind exchanges is that they apply to both personal and real property.

Step-by-step explanation:

The correct statement regarding like-kind exchanges is option C) Like-kind exchanges apply to both personal and real property.

Like-kind exchanges refer to a tax-deferred transaction where a taxpayer exchanges a property for another property that is of a similar nature or character. This can include both personal property (such as machinery, equipment, and vehicles) and real property (such as land and buildings). The key requirement is that the properties being exchanged are of like-kind, meaning they have a similar nature or character, even if they differ in quality or grade.

It is important to note that under the Tax Cuts and Jobs Act (TCJA) of 2017, like-kind exchanges are still allowed, but they are limited to real property exchanges. This means that option D) Like-kind exchanges are no longer allowed under TCJA of 2017 is incorrect.