Albert owns 100 acres of land on which he grows spruce trees. His adjusted basis for the land is $100,000. He receives condemnation proceeds of $10,000 when the city’s new beltway takes 5 acres along the eastern boundary of his property.

He also receives a severance award of $6,000 associated with the possible harmful effects of exhaust fumes on his trees. Albert invests the $16,000 in a growth mutual fund. Determine the tax consequences to Albert of the:

a. Condemnation proceeds.

b. Severance award.