(1) Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the Internet and discovered that it was worth at least $1,000. She sold it on an Internet auction site for $1,000 in July. Was the ring a capital asset? Explain? What were the amount and nature of the gain or loss from the sale by Barbella?

(2) Stephanie owns real property (adjusted basis of $90,000; fair market value of $125,000) that she uses in her business. She exchanges it for other real property (worth $100,000) and stock (worth $25,000). Determine Stephanies:

a. Realized and recognized gain or loss on the exchange.

b. Basis of the new real property.

c. Basis in the stock she received.