Question

The tax law recognizes that nontaxable exchanges result in a change in the form but not the substance of the taxpayer's relative economic position.

A) True

B) False

Answer 1

The tax law recognizes that nontaxable exchanges result in a change in form but not substance of the taxpayer's economic position.

Step-by-step explanation:

The statement is true. The tax law recognizes that nontaxable exchanges result in a change in the form but not the substance of the taxpayer's relative economic position. This means that even though the form of the exchange may change, the taxpayer's economic situation remains the same. For example, if someone swaps their car for another car of equal value, the form of their ownership changes, but their economic position remains unchanged. This principle is important in determining the tax consequences of certain transactions.