1. John is a part time real estate investor, and John has several lots of undeveloped land along the Big Sur coastline. John works full time as a musician, but occasionally makes sales of lots. One particular lot was attracting interest by two developers named Edie and Sedgewick (neither of which is related to John). The lot John owned he had inherited from his grandfather, in 2004. This lot consisted of cattle grazing land, and Johns grandfather had used it as such, but John had never done anything with the property except hold it as an investment and look for a buyer, and, during 2019, John got two offers. The lot was bought by Johns grandfather originally for $45,000, but the valuation of the lot on Johns grandfathers estate tax form was $190,000. Edie offered John an undeveloped lot in San Diego county worth $125,000 along with cash of $63,000, which John would use to develop the lot for sale. Sedgewick offered John a building in Ventura valued at $212,000 which John would continue to rent out to Sedgewicks tenant.

If John agreed to Edies offer in 2019, what would be Johns gain or loss realized, and gain or loss recognized? If John accepts Sedgwicks offer in 2019 what would be Johns realized gain or loss? If John accepts Sedgewicks offer, what is the minimum gain that John must recognize for 2019, and thereby what would be Johns basis in the new building?