Which of the following choices is INCORRECT in a situation where boot is both given and received in a like-kind transaction?

A. A realized gain is recognized to the extent of boot received.
B. The boot given generally cannot be netted against the boot received.
C. When boot received is in the form of liabilities, the taxpayer is allowed to net any boot paid against the boot received.
D. Boot given can always be netted against any boot received to determine the amount of the realized gain that must be recognized.

The incorrect statement in a like-kind transaction where a boot is given and received is that the boot given can always be netted against any boot received to determine the amount of the realized gain that must be recognized.

Explanation:

Out of the three choices given, the incorrect statement in a situation where boot is both given and received in a like-kind transaction is The boot given can always be netted against any boot received to determine the amount of the realized gain that must be recognized In such a transaction, the boot given generally cannot be netted against the boot received, which means that any realized gain should be recognized to the extent of boot received, and the boot given cannot be used to offset it.

For example, if a taxpayer exchanges a property worth $100,000 and also gives $20,000 in cash as boot, and receives a property worth $110,000 and $10,000 in cash as boot, the realized gain would only be recognized to the extent of the $10,000 cash boot received, not the $20,000 cash boot given.

Therefore, the correct statement is that the boot given generally cannot be netted against the boot received.

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