Question

Regarding the like-kind exchange rules, which of the following statements is correct?

A) Like-kind exchange rules apply only to real estate.
B) Like-kind exchange rules apply to any type of property, not limited to real estate.
C) Like-kind exchange rules apply only to personal property.
D) Like-kind exchange rules do not apply to exchanges involving real estate.

Answer 1

Like-kind exchange rules apply to any type of property, not limited to real estate.

Step-by-step explanation:

The correct statement regarding the like-kind exchange rules is B) Like-kind exchange rules apply to any type of property, not limited to real estate.

Like-kind exchange rules allow individuals or entities to defer capital gains tax on the exchange of property as long as the exchanged properties are considered of similar nature and use. The rules apply to both real estate and personal property, such as vehicles or equipment, as long as the properties meet the criteria of being like-kind.

For example, if someone exchanges a car for another car of similar value and use, the transaction would qualify for a like-kind exchange under the rules.