The General Rule Regarding the Exchanged Basis in the New

question 27

Multiple Choice

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

• A) The basis is equal to the fair market value of the new property.
• B) The basis is equal to the fair market value of the old property.
• C) The basis is equal to the adjusted basis of the old property.
• D)The basis is equal to the cost basis of the old property.
• E)All of these

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in net income or loss.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Direct Method

One of two methods of preparing the net cash flow from operating activities section of the statement of cash flows. Each of the major areas of sources and uses of cash for operations is detailed separately.

Indirect Method

One of two methods of preparing the net cash flow from the operating activities section of the statement of cash flows. Involves converting the accrual basis net income figure from the income statement to the net cash flows from operating activities.