223. a. Orange Corporation exchanges a warehouse located in Michig

223.

a. Orange Corporation exchanges a warehouse located in Michigan (adjusted basis of $560,000) for a warehouse in Ohio (adjusted basis of $450,000; fair market value of $525,000). Indicate the amount of gain or loss that is recognized by Orange Corporation on the exchange, and the basis of the warehouse acquired.

b. Assume that in addition to the warehouse Orange Corporation also received $100,000 in cash. Indicate the amount of gain or loss that is recognized by Orange Corporation on the exchange, and the basis of the warehouse acquire

c. How would your answer in b. change if instead of receiving $100,000 in cash, the other party assumed Orange’s $100,000 mortgage on the Michigan warehouse?

224. Eunice Jean exchanges land held for investment located in Rolla, Missouri, for land to be held for investment located near Madrid, Spain. Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000. Eunice Jean also receives cash of $45,000.

a. What is Eunice Jean’s recognized gain?

b. What is her basis for the land received?

225.For each of the following involuntary conversions, determine if the property qualifies as replacement property.

a. Chuck’s restaurant building is destroyed by fire. He clears the site and builds another restaurant building.

b. Diane’s warehouse which she used for storing inventory is destroyed by a tornado. She purchases another warehouse in which she will store inventory.

c. Part of Andrew’s dairy farm land is condemned to make way for an interstate highway. He uses the condemnation proceeds to construct a barn to be used for storing cattle feed.

d. Liz owns a shopping mall which is destroyed by a flood. Since the tenant occupancy rate was down, she uses the insurance proceeds to purchase an office building which she will rent to tenants.

e. Eleanor’s Maserati Gran Turismo is stolen. The original cost was $125,000, and she had used it exclusively for personal use. Due to the limited supply of this model, it had appreciated in value. Eleanor received insurance proceeds of $130,000 and uses the proceeds to purchase a replacement Gran Turismo.

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