In 2018, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence. True False
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That statement is generally false. The basis of a taxpayer's replacement residence after a like-kind exchange, as per the rules under Section 1031 of the Internal Revenue Code in the United States, equals the basis of the old property minus the deferred gain and plus any additional cash paid.
However, for personal residences, like kind exchanges were generally limited to real estate used for business or investment purposes. For most personal residences, the rules regarding the exclusion of gain on the sale of a principal residence (as per Section 121 of the Internal Revenue Code) apply, which allows individuals to exclude a certain amount of gain from the sale of their primary residence under specific conditions.