Final answer:
The statement suggesting that nontaxable exchanges are justified because a taxpayer has the wherewithal to pay is False. Nontaxable exchanges are based on the continuity of the taxpayer's investment, not their ability to pay. The question confuses this with the ability-to-pay taxation principle.
Step-by-step explanation:
The statement that one of the justifications for nontaxable exchange treatment is that the taxpayer has the wherewithal to pay is False. Nontaxable exchanges don't consider the taxpayer's ability to pay; instead, they are structured to avoid recognizing a gain or loss for tax purposes, typically because the taxpayer's investment in the property continues despite the exchange.
The question appears to be a mix-up with the ability-to-pay principle of taxation, which asserts that taxes should be levied based on an individual's or entity's ability to pay. According to the ability-to-pay principle, those with greater financial capacity should bear a larger tax burden than those with less capacity. However, this principle does not provide the basis for nontaxable exchange treatment; nontaxable exchanges are guided by other tax code provisions.