In Year 1, a taxpayer buys undeveloped land (Tract 1) for $50,000. In Year 3, when Tract 1 is worth $80,000, the taxpayer is offered other undeveloped land (Tract 2) in trade. Because this other land is only worth $70,000, the taxpayer demands and gets an additional cash payment of $10,000. In Year 5, Tract 2 is sold for $100,000. What is the taxable gain to the taxpayer?

Question 5 options:

$10,000 in Year 3 and $50,000 in Year 5.

$0 in Year 3 and $60,000 in Year 5.

$30,000 in Year 3 and $30,000 in Year 5.

$20,000 in Year 3 and $40,000 in Year 5.