Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value of $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchange has commercial substance. Required:

1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of the new land?

2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.

3. Repeat requirement 1 assuming that the exchange lacked commercial substance.

4. Repeat requirement 4 and 5 in case A.