Question

A transaction authorized by Section 1031 of the Internal Revenue Code that defers some taxes on so-called like-kind property (e.g., real estate for real estate). Also called a nontaxable exchange or tax-deferred exchange.

True
False

Answer 1

The student's description of a Section 1031 exchange, which defers taxes on like-kind property and is also known as a nontaxable or tax-deferred exchange, is true and relates to tax law.

Step-by-step explanation:

The statement given by the student describes a transaction authorized by Section 1031 of the Internal Revenue Code, which allows for the deferral of taxes on exchanges of like-kind property, such as real estate for real estate. This transaction is indeed known as a nontaxable exchange or tax-deferred exchange. The descripton provided by the student is true; Section 1031 permits taxpayers to postpone paying tax on the gain if, instead of selling the property, they exchange it for property of a similar kind.