Chapter 12

Problem 1:

Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey. Details of the two properties:

	Robert	John
	Tennessee	N. Jersey
Fair Market Value	$9,000,000	$4,000,000
Adjusted Basis	3,000,000	3,000,000
Liabilities transferred with property	2,000,000	-0-

In addition, John pays Robert $3,000,000 cash as part of this transaction. What is the gain (loss) recognized by Robert in this transaction and what is his basis in the New Jersey property?

Problem 2:

A flood destroys Owen's building that cost $100,000 in 1994, which has an adjusted basis of $80,000. Owen's insurance company reimburses him $125,000 for his loss. Owen promptly reconstructs the building for $115,000. What is the minimum amount of gain that Owen must recognize and his basis in the new building?

Problem 3

Tony and Faith sell their home for $505,000, incurring selling expenses of $35,000. They purchased the residence for $105,000 and made capital improvements totaling $27,000 during the 20 years they lived there. What is their realized gain and recognized gain on the sale?