Luce Company Exchanged the Copyright on a Software Application for a Copyright

question 39

Multiple Choice

Luce Company exchanged the copyright on a software application for a copyright on a different software application.Luce's gain on the exchange was nontaxable (because the copyrights were like-kind) but was included in financial statement income.Which of the following statements is false?

• A)Luce's book basis in the copyright received is the copyright's cost (FMV).
• B)Luce's tax basis in the copyright received equals its tax basis in the copyright surrendered.
• C)Luce's future amortization deductions with respect to its tax basis in the copyright will be different from future amortization expense for financial statement purposes.
• D)None of the statements is false.

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Definitions:

Journal Entries

Recording of financial transactions in a ledger, such that the total debits equals the total credits, reflecting all changes in accounts within a particular accounting period.

Fiscal Year-End

The fiscal year-end is the conclusion of a 12-month or 365-day period that a company uses for accounting purposes and preparing financial statements, which does not necessarily coincide with the calendar year.

Deferred Income Tax Liability

A tax obligation due in the future for income that has been recognized in the financial statements before it is taxable.

Tax Liability

Tax liability refers to the total amount of tax that an individual or entity is obligated to pay to a taxing authority, such as the government, based on income, property, and other applicable factors.