Buddy Morgan is a real estate agent for Coastal Estates, a residential real estate development. Because of his outstanding sales performance, Buddy is permitted to buy a lot for $300,000 that normally would sell for $500,000. Buddy is the only real estate agent for Coastal Estates who is permitted to do so.
a. Does Buddy have gross income from the transaction? Explain
b. What is Buddy's adjusted basis for the land?
c. Write a letter to Buddy informing him of the tax consequences of his acquisition of the lot. His address is 100 Tower Road, San Diego, CA 92182.